I have an 8 and 10 year old. They each have about 10K in savings accounts that I am watching grow at about 0.05% per year. What is the best way to invest their money without causing them financial issues in the future, ie tax issues, financial aid for college (realistically will not be an issue with the 529s but you never know), etc… Thanks in advance.
I have an 8 and 10 year old. They each have about 10K in savings accounts that I am watching grow at about 0.05% per year. What is the best way to invest their money without causing them financial issues in the future, ie tax issues, financial aid for college (realistically will not be an issue with the 529s but you never know), etc… Thanks in advance.
There is no reason that an 8 and 10 year old should be in savings accounts unless they will need the money in 5 years. The money should be put in appropriately-diversified equity index funds, rebalanced annually, and discussed with your children. They are old enough to learn about investing and how the market works.
Better yet, put them to work mowing lawns, babysitting, delivering papers, working in your office, etc. and set up Roth IRAs for them.
I have an 8 and 10 year old. They each have about 10K in savings accounts that I am watching grow at about 0.05% per year. What is the best way to invest their money without causing them financial issues in the future, ie tax issues, financial aid for college (realistically will not be an issue with the 529s but you never know), etc… Thanks in advance.
There is no reason that an 8 and 10 year old should be in savings accounts unless they will need the money in 5 years. The money should be put in appropriately-diversified equity index funds, rebalanced annually, and discussed with your children. They are old enough to learn about investing and how the market works.
Better yet, put them to work mowing lawns, babysitting, delivering papers, working in your office, etc. and set up Roth IRAs for them.
Can you set up a Roth for a kid if they don’t have earned income? Hard to get that in a 8 and 10 year old. I don’t think allowances count.
Yes, we have 529s they should not need the money for college/grad school. I think I did not ask my question with enough specificity. Put differently, I know they will not need the money in 5 years. I know the savings account is not a vehicle for growing the money. And yes, I want to introduce them to investing. Do I call Vanguard or Fidelity and say I want to open an account for each child? Is my name on the account? Are there any tax consequences for me opening an account for my kids if my name is on the account? ie What is the best way to set up the account?
I know the savings account is not a vehicle for growing the money. And yes, I want to introduce them to investing. Do I call Vanguard or Fidelity and say I want to open an account for each child? Is my name on the account? Are there any tax consequences for me opening an account for my kids if my name is on the account? ie What is the best way to set up the account?
My baby has an UTMA and Roth IRA with Vanguard,
I have an 8 and 10 year old. They each have about 10K in savings accounts that I am watching grow at about 0.05% per year. What is the best way to invest their money without causing them financial issues in the future, ie tax issues, financial aid for college (realistically will not be an issue with the 529s but you never know), etc… Thanks in advance.
There is no reason that an 8 and 10 year old should be in savings accounts unless they will need the money in 5 years. The money should be put in appropriately-diversified equity index funds, rebalanced annually, and discussed with your children. They are old enough to learn about investing and how the market works.
Better yet, put them to work mowing lawns, babysitting, delivering papers, working in your office, etc. and set up Roth IRAs for them.
Can you set up a Roth for a kid if they don’t have earned income? Hard to get that in a 8 and 10 year old. I don’t think allowances count.
Allowances don’t count – that is why I gave you some examples.
As for taxes, you have to file a tax return for your child. Earnings and dividends (up to a limit) are based upon the child’s tax rate (i.e. Kiddie Tax). After that, it is taxed at the parent’s tax rate.
I have an 8 and 10 year old. They each have about 10K in savings accounts that I am watching grow at about 0.05% per year. What is the best way to invest their money without causing them financial issues in the future, ie tax issues, financial aid for college (realistically will not be an issue with the 529s but you never know), etc… Thanks in advance.
There is no reason that an 8 and 10 year old should be in savings accounts unless they will need the money in 5 years. The money should be put in appropriately-diversified equity index funds, rebalanced annually, and discussed with your children. They are old enough to learn about investing and how the market works.
Better yet, put them to work mowing lawns, babysitting, delivering papers, working in your office, etc. and set up Roth IRAs for them.
Can you set up a Roth for a kid if they don’t have earned income? Hard to get that in a 8 and 10 year old. I don’t think allowances count.
Allowances don’t count – that is why I gave you some examples.
Understood, but these kids are in 2nd and 4th grade presumably. Would those examples apply? What is a realistic job that a 2nd and 4th grader could have?
) and also working in my dad's printing business. I've paid neighbor kids who were as young as 10 to watch things when we were out of town. Your children won't make $5,500 to start, but even a few hundred gets you started.
You can set up a custodial account through any brokerage firm — Vanguard, Schwab, etc. You are the custodian until the child reaches age of majority. When the child reaches majority, the account transfers to the child. You can only contribute $14k per year — annual gift limit. Two types of accounts: UTMA or UGMA. As for taxes, you have to file a tax return for your child. Earnings and dividends (up to a limit) are based upon the child’s tax rate (i.e. Kiddie Tax). After that, it is taxed at the parent’s tax rate.
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