Investing for kids.

[Rhcuam]

I have a meeting next week to go meet with our financial guy. My wife and I are wanting to setup some accounts up for our two kids, 11 and 6. We briefly discussed 529 plans as well as a second plan, I can’t remember the name, but basically you the hold account for the minor until are 18 then it becomes theirs.
From the very brief overview I was given it seems one drawback to the 529 plan is it has to be used for educational purposes where as the other plan can be used for whatever.
For guys or gals that already have something like this set up do you have it automatically drafted from your account or just put money in it if you have a little excess lying around?

If anyone has any recommendations on things to look for or plans to avoid I’d love to hear.

 

[stealthy_bowman]

I set up 529s when my kids were born and now I have one starting college next year and the other has 3 years to go. I've always used the automatic contribution option and you will get used to that pretty quickly. One tip, carefully select the right 529 plan and keep in mind that you do not have to use the one that your state offers. One of the best plans out there to consider is the Utah 529 plan, it has good investment options and very low maintenance fees.

 

[Fatrack]

I set up 529s when my kids were born and now I have one starting college next year and the other has 3 years to go. I've always used the automatic contribution option and you will get used to that pretty quickly. One tip, carefully select the right 529 plan and keep in mind that you do not have to use the one that your state offers. One of the best plans out there to consider is the Utah 529 plan, it has good investment options and very low maintenance fees.

I also used the Utah 529 plan for my kids for the reasons stated above. One thing I liked was that you can reassign the beneficiary; so, I set account up in my name. I have 3 kids and will reassign the beneficiary as needed. I know I won't have enough for 3 kids' college education, but what is in there can be split amongst them as needed.

 

[ashersdad]

Definitely have it auto drafted each month. You can always throw in extra when you want. I also wanted to invest "long term" for my kids along with college so as soon as they started having earned income, I started contributing to Roth IRA's for them as well as the 529's (I actually match what they put in so they have skin in the game). Pretty amazing what 40-50 years of compounding can look like.

 

[SAJ-99]

I have a meeting next week to go meet with our financial guy. My wife and I are wanting to setup some accounts up for our two kids, 11 and 6. We briefly discussed 529 plans as well as a second plan, I can’t remember the name, but basically you the hold account for the minor until are 18 then it becomes theirs.
From the very brief overview I was given it seems one drawback to the 529 plan is it has to be used for educational purposes where as the other plan can be used for whatever.
For guys or gals that already have something like this set up do you have it automatically drafted from your account or just put money in it if you have a little excess lying around?

If anyone has any recommendations on things to look for or plans to avoid I’d love to hear.

Set up a 529 for my daughter. I will invest in her education and her future, so it worked for us. If she does something stupid and decides not to use it on school I will have new-found cash to spend on hunting trips in about 10yrs.

 

[Steiny]

I set up accounts for each of the grandkids and started w/ $10k each. Did not select 529's for reasons mentioned in your post. Basically just put them in good mutual funds with their mom (our daughter) over these accounts until they reach age 18. We've added cash to these accounts a couple times since. My recommendation to my daughter is to not use this $$ for education and figure other ways to pay for college if they go that route. Left alone, this could provide them a real nice nest egg later in life.

 

[Straight Arrow]

Set up 529 account for each of grandchildren. I contribute several hundred dollars to each at Christmas and at birthdays. It likely won't completely fund a college or trade school education, but certainly will help. It was done with the express intent to support higher education for them after high school.

If you wish for recipients to be able to use the investment otherwise, then don't use the 529 option. But it is a good investment IMO.

 

[HSi-ESi]

We set up 529's for the kids and try to max out our contributions each year. We also setup CD's for them at a local credit union, they usually have some promotions for kids - where if they leave the money in the CD until they are 18 it gives a better return rate. My grandparents did that for me (the CD) - and instead of using it for education I was able to put it into my first home purchase. Now I feel like that has carried through all of my home purchases when we moved from place to place.

All of their 4H project money goes into Savings and we're constantly explaining how Interest works, simple money-management etc. They are now getting old enough to open a checking account and start using it.

 

[Rhcuam]

Thanks for the replies. Both of them are pretty good little savers. When they get birthday, Christmas, or chore money we always have them put 60-70% of it in savings and then they can have the 30% to spend or whatever they would like to do with it.
Problem with their savings accounts are they make next to nothing on interest.
I was thinking about telling them I would match whatever they put into it over time.

 

[npaden]

I have both for my son. On the "UTMA" Uniform Transfers to Minors Account" I have worked with him to buy some individual stocks that he wanted to buy and that has worked out well. On the 529 it is just in the generic Portfolio that tracks off his age as he gets closer to graduating. You can use 529 money for trade schools and use it for relative's kids if yours doesn't end up using it.

My son is 15 now and I would like for him to get some earned income so he can start contributing to a ROTH IRA and I've told him that I would match him 100% on whatever he contributed (he earns $1,000 and puts $1,000 in the ROTH IRA and I give him $1,000 that he can do whatever he wants with) but he has so many activities that it would be tough on him and us if he ended up actually getting a job so for now that isn't happening.

 

[Straight Arrow]

Pardon my pride, but: My oldest grandson attends MSU on a Rodeo scholarship, so last winter when studies were online he stayed in Arizona where he could do college studies in the morning and rope in the afternoons. He rented his Mom's car when she was out of town and did so well that he went to the bank and took out a business loan to buy a new car, which he leaves at the airport for rental. He can open it up with his phone for clients. I was so impressed with his financial acumen that now I just give him cash directly, as I'm confident he can use it advantageously.

 

[belshawelk]

529 is the way to go if they are going to college. It gives you a huge tax break to out money into. I believe it 8k per year. I use it for both my girls who are now in college. Easy to use and earns decent returns.

I have other accounts set up for my girls retirement which they cant touch and other accounts. For me and others may disagree but I am not allowing them to touch any of the money i have for them until they are 25. Our wills are the same way. I just don't think its a great idea to get a bunch of money to an 18yr old. I think at 25 they are better equipped not to get taken advantage of, plus college is done and they will have started to enter workforce. Our wills go into a trust until they are 25 if something were to happen to us. Just my thoughts,and you may disagree.

 

[Irrelevant]

WA has an agruably better program for residents than the 529 plan, GET, though it also offers a 529 for those interested. I have heard Utah's 529 is the best out there.

 

[rke]

We too set up 529 accounts for our kids. We did individual accounts that they also contribute to. I track how much they contribute in case they decide not to go to college and then I will give them back their contributions. Also, the accounts never automatically become theirs. God forbid they ever make some REALLY poor choices in life, we wanted to always own the money until it was spent. In addition, my oldest 2 sons (16 and 14) have their own investment savings accounts that they contribute to as they earn money. One son has a job with weeekly hours and other works for time-to-time for me so his income isn't as consistent.

 

[Benjamins]

I have a 529 through the state of North Dakota for both my girls since there is a $500 match for each one and its also really easy for grandparents or aunts/uncles to gift money to it instead of toys. But unstead of me adding a bunch of money to that I just put money in an S&P index fund for them. Yeah they don't get the tax breaks that a 529 gets but I can withdraw it for any reason if they decide to not go to school or something. My one advice is don't hire someone to manage their account (unless it has certain tax advantages). It has been proven over and over that 80% of the time a simple S&P index fund will out do a money manager after fees are factored in.

 

[Falcon75]

I like a max funded universal indexed life policy for kids because can use money for anything at any time not just education. 1000 for 5 years on a 5 year old is over a million at 65 in cash value. Read the book missed fortune. Need to find a agent and insurance company that knows what doing as it is backwards from most ways of buying insurance buying the least for the most amount of money and staying within irs guidelines.

 

[NEWHunter]

Putting money in an account for a kid for post secondary education? Who knows what they will want to do in 10 or 15 years? What if they want to jump into a trade? What’s next, moose and sheep points before a kid can walk!?!!!?

 

[ashersdad]

Putting money in an account for a kid for post secondary education? Who knows what they will want to do in 10 or 15 years? What if they want to jump into a trade? What’s next, moose and sheep points before a kid can walk!?!!!?

529 plans work for trade schools the same as college. Parents are the owner of the account, not the kids, so it's always the parent's money.

 

[Trial153]

529s are the way to go. Two children and my god daughters monthly contributions look like a mortgage payment. I am just thankful that we are in the position to be able to do it.

 

[Allenkoz]

I have a meeting next week to go meet with our financial guy. My wife and I are wanting to setup some accounts up for our two kids, 11 and 6. We briefly discussed 529 plans as well as a second plan, I can’t remember the name, but basically you the hold account for the minor until are 18 then it becomes theirs.
From the very brief overview I was given it seems one drawback to the 529 plan is it has to be used for educational purposes where as the other plan can be used for whatever.
For guys or gals that already have something like this set up do you have it automatically drafted from your account or just put money in it if you have a little excess lying around?

If anyone has any recommendations on things to look for or plans to avoid I’d love to hear.

The 529 doesn't have to be used for education. Let's say your child receives a full scholarship and doesn't need the funds. That money is always yours and you can use it however you like. You would simply need to pay regular income tax on it at that point.