Putting away cash for my kid
ManChild
on her. Well, seeing as we have all we need for her I thought I
should sock what are essentially her pennies and dollars away for when
she is older. We are talking about $1000 here and I'd like to be able
to put it away somewhere that will earn ok for about 18-20 years. I
thought about just opening a high interest savings account in her name
but I don't want her to fall foul of financial aid people down the
road. I don't want to put it in a 529 plan for her college, I want
her to have freedom to spend this on what she will when she has
reached an age where she can appreciate it. I just want a decent
enough return to stop inflation turning it into peanuts. We'd like to
be able to supplement this over the years with things like birthday
cash ...
Any thoughts?
Avrum Lapin
<29bd1944-8b67-47e9...@e4g2000prn.googlegroups.com>,
ManChild <star...@gmail.com> wrote:
Consider an a account in your name but POD or TOD to the child. When
the child is 18 or 21 give the money to the child. If you die 1st the
money is paid or transferred to the child.
With an 18 year time horizon consider an index fund (say Vanguard) is
they accept $1K min
anoop
[..]
>�I just want a decent
> enough return to stop inflation turning it into peanuts. �We'd like to
> be able to supplement this over the years with things like birthday
> cash ...
>
> Any thoughts?
I-bonds?
http://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds.htm
joeDOTweinsteinATgmailDOTcom
+ whatever inflation is.
There is no service charge for purchase or redeeming, and depending on
what the money
is used for, (college) the earnings can be tax-free.
BeachBum
"ManChild" <star...@gmail.com> wrote in message
news:29bd1944-8b67-47e9...@e4g2000prn.googlegroups.com...
Regards,
BeachBum(Jim)
Don
> With an 18 year time horizon consider an index fund (say Vanguard) is
> they accept $1K min
It is interesting that several other people are recommending
fixed-income products. A few years back, I would bet almost everybody
would have recommended securities for an 18 year time horizon.
Default User
> With an 18 year time horizon consider an index fund (say Vanguard) is
> they accept $1K min
Most Vanguard funds require a minimum investment of $3000. The only one
lower that I'm aware of is STAR, which is not an index fund.
Brian
--
Day 268 of the "no grouchy usenet posts" project
BreadW...@fractious.net
In order for the earnings on the savings bonds to be tax-free
for college, the bonds have to be owned by the *parent*. The
child must not be a co-owner, but may be the listed beneficiary.
FWIW.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
Bread
> > I just want a decent
> > enough return to stop inflation turning it into peanuts. �We'd like to
> I-bonds?
> http://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds.htm
The current "real" rate on them is 0.10%. �You get that plus
the inflation adjustment, but eventually will pay income taxes
on the overall increase. �So they'll just keep up with inflation
and then you'll be hit with taxes when it's time to spend them.
These things were a steal back in 2000 when the real rate was >3%,
but, of course, back then many folks thought that it was easy
to get double-digit growth in equities year in and year out...
i-bonds may still not be a terrible idea, but observe them
carefully. �They cannot be redeemed at all before 12 months,
but after that, during the first 5 years, you can redeem
them and forfeit 3 months of accrued interest -- if the
real rates have increased by then, giving up 3 months of
pitifully small interest may be a very small price to pay
to get newer higher rates going forward (and locking in
another 12 months starting period).
re: other points that came up
With respect to concerns that the kid will pay taxes on
his unearned income, note that at present, a child or
dependent has a statutory deduction of $900 and a
standard deduction of an additional $900. �You'd have
to put away a good bit of money and have it earning
quite a bit before you need to worry about your kid
paying income taxes on it.
<http://www.irs.gov/publications/p929/index.html>
and
<http://www.irs.gov/pub/irs-pdf/f8615.pdf>
That all said, I'd probably still be inclined to put
the cash into the 529, even though the OP said he
didn't want to. �If you were planning on paying for
college anyway, that's the best place for that cash,
and if you want to make like those gifts should be
cash for the kid, keep track of how much of presents
for the kid you got which you put in the 529 - and
just give the kid the cash out of your own pocket
when the time comes.
If you are considering possible impact on financial
aid, it's better for the money to be in the 529 and/or
in your own accounts than to be in an account owned
by the kid.
However, for tax purposes alone, there's no reason
not to have at least some in the kid's name. �Not a
huge amount (ie. at some point, the unearned income
may cross the threshold and have to be paid at the
parent's rate anyway). �But certainly more than the
kid's likely to accumulate from little gifts here and
there.
If we're just talking about a thousand bucks or so,
I just don't know that it's worth your time or the
hassle of doind much more than going down to whatever
bank you do your own local banking at and opening up
a children's savings account. �We have one for our kid
with a whopping $175 in it.
You have some other options such as opening a joint
account at a brokerage, opening a UGMA account with
yourself as the custodian. �If you are considering
these idea, do so very carefully. �A joint account
may have gift tax implications (contributions may
not qualify for the annual exclusion), and a UGMA
account has other quirks. �As I said, unless you are
talking about a substantial sum, or regular additions
such that it'll soon become a substantial sum, you'll
likely do best to just start with a regular savings
account at the local bank.