So I recently had my first and I am looking to put money away for him. Preferably in his name if possible. Can you set up a 401k or an IRA for a child in their name?

If not, what about (I believe it's a) 429B? The college fund investment. I would very much like to set the little guy up well early on since I'm just now starting myself and know I'll be playing catchup the rest of my life and I don't want that for him.

Thanks.

I was able to set up a custodial stock account for my daughter with options express.

I would be interested in hearing about the Roth IRA if you find a good place to open one.

Open a 529 plan at Vanguard and put money into it based on his projected education expenses.  Set up a monthly contribution.  

Will do. Is there any other kind of investment I can do for him though?

I'll look into that. Is it like an IRA?

As noted a 529 is for education purposes only.



You cannot do any type of IRA/roth because the person needs to have a reported income (spouse excluded).



You can do a regular investment in mutual funds. I would suggest going to daveramsey.com and go to his ELP for investing and finding one close to you. They should explain it to you easily.





 

What is your goal?  Do you want him to have money for college, a house, retirement?

Roth once old enough / has job.

Basic brokerage account that keeps you financially stable and can fund everything else.  Invest wisely...

I like USAA brokerage over vanguard because they have a trailing stop loss feature.  YMMV.

I wouldn't put anything in the kid's name.  I've seen too many kids blow too much money when it is handed to them.

Keep it in your name, if the kid turns out solid, pay for his college or buy him his first house or whatnot.

If the kid turns out to be a drug addled turd, at least you aren't flushing the money down the toilet when he reaches the age of maturity.

A friend has a trust set for his kids with all kinds of stipulations...get a tattoo, no money, have a kid out of wedlock, no money, fail to graduate from college, no money, etc.  I would find it hard to anticipate all the ways in which a kid could turn out to be fail sauce, so I am keeping the money in my name until the time comes.

Thanks for the advice. I will look into all of this.

The idea was to fund a 529 for school and a secondary fund for him to have when he was older. My grandparents gave me a small amount of money when I turned 18 and like an idiot child I pissed it away. The idea here was to have something to turn over to him when he was close to my age. I'm 30 now and finally have removed my head from my ass. The only problem is I haven't taken the time to invest for myself as of yet and am now trying to learn quickly so I can take care of myself and teach him as he gets older.
I'll talk to the ELP. I've used them before for various other things and they have been solid.

Id definitely think this over. You wont meet many kids that get a chunk of money for college or a house that ever amount to anything. My partner always says "dont give it to them, give them the skills to get it themselves".

I understand what you want to do. It was everything i could do to not set up a similiar account when my son was born. Im not saying it cant be done right. Just make sure you think what cause and effect are so it is done right.

What would have happened if you were 18 and had to skills to think long term and manage money/goals responsibly? Sounds like if you are getting on track at 30 then those life skills would have been worth several hundred grand, maybe 7 figures.

I actually just came here to post this.

On the birth of my daughter 2 years ago I set up a regular savings account - $400/month from mom and I.  Want to do the same for my new one.  Not sure if they get access to it at 18 (their name, but I opened it ... guess I can get to that later).

thinking of a 529 for them as well ... though that's what the saving account is supposed to be for.  Is there a better return rate on the 529?

Finally, investment options.  What's good for a 15-20 year projected account?

Savings accounts have very very little return in today's world.

My 529s are good for about 10% yearly gain.

So it seems you have 2 goals.  College and later on.

For college it is hard to beat a 529 plan.  This is one of the best ones.  Smart 529 Select
If he decides not to go or flunks out you can get the money back. (less a penalty)
If you can fund both a 529 and a retirement plan then do it.  If not do the retirement plan.  He will need it.  Who's to say what he will do with a college education if he even gets one.
It may be better for him to let him do college himself so he has some skin in the game (my beliefs).

For later on it's very tricky.

Without a trust he will have access at 18 years old and definately piss the money away.  I will go on with recommendations assuming this because it would be to risky and illogical to assume otherwise.

If he gains access before retirement (59.5 y.o.) then when would you want him to have it?  You can guess any age but reality is you can't guess right.  
With current divorce rates you will most likely be funding his x-wife.  This may not be a bad thing, especially if he has kids in need at the time but thinking about the x driving around in a new BMW because of the money you put away 30 years ago for him does not sit well with me.

Therefore, I would recommend a retirement trust of some kind.  This helps him later on no matter what.  
Here's how I look at it.  Regardless of his life decisions or what happens he will have to depend on his skills to survive and provide.  If he decides to be an artist he may starve for years but will still have a way to retire because of the trust.  (Yes he may have Social Security, but may not)

The best thing the child has is time on his side.  There is no better investment than compounding interest in this scenario. IMO
You NEED a trust to prevent him from accessing it before the time determined.  I would recommend 59.5 as the retirement age goal.

So you have a couple of options.
1. A trust with an investment account.  Stocks, funds etc....  The upside is low fees.  The downsides are paying taxes (deducted from the account) on capital gains and taxable dividends, finding and paying a financial advisor, a trustee and or lawyer.  You will have to set up these things and there are costs associated with them that may offset the low fees.

You may think about managing this yourself but.... you can't be the trustee and you need legal help to set up the trust,  how will you do this for 50+ years?

2. Ric-e trust
  This is a retirement InCome for everyone trust designed by Ric Edelman.
  Downside is higher fees.  It costs $400 to set up.  The advisor fees are split between his firm and the annuity company.  It runs about 0.12% higher than say Vangaurd.  This may not sound like a lot but it may cost you $30k over the life of the loan.
    It is also NOT REVERSIBLE.

 Upsides.  This is an annuity that is within a trust.  He does not have access until 59.5 (some exceptions, disability etc.)
  They set up the trust and the annuity.  You get a local lawyer to set it up with them.  They give you a $200 credit for the lawyer so it's not much.
   Here is the good part.  Because it is an annuity it accumulates TAX DEFFERED.  This means that there is more money in the account compounding.  (If you do not understand the power of compounding interest than google it and learn RIGHT NOW)
  Your son will pay taxes on the money he withdraws at retirement at his current tax rate.
  You will need $5k to start it.  You may increase that amount or add to it.  I recommend a lump sum and then forget it.  You are done helping him with his retirement.
With an assumption of 10% compounding (historically stock market gains) it may be worth about $2.4 million upon retirement.

RIC-E Trust

Great info. Thanks

RE: 529 plans, before checking into ANY out-of-state or other plans, check your in-state plans first. In Indiana we have a 20% tax credit for eligible 529 contributions up to $5k/yr. What that really means is I contribute $5k towards a 529 and the state gives me $1,000 of that back when tax time rolls around (or I owe $1,000 less on my state taxes). In my mind, I boil that down to a $4,000 investment on my part that has an instantaneous account value of $5,000. You can do that math, that's a 25% return right at the start. Even if other accounts perform slightly better, it's going to be VERY hard to beat that 25% instant gain.

Your state may offer a similar "incentive" and you would be stupid not to take advantage of it. My daughter was born in December, I started the 529 right away to take advantage of that...

I'd suggest you visit the thewhitecoatinvestor's blog and research his views and advice on 529s and income levels.

Just a note,

Your kid can have $600 in income without filing a tax return or paying taxes.  So, unless you have $20-30,000, you need not worry about taxes.

Before you save in a kids name for education look into the potential impact on financial aid.

The impact is going to be there whether it's in the kids name or parents name. The only options to avoid financial aid impacts from having that sort of money are to burn the money or hide the money.

Actually, the best option is for the OP to put the money in his own retirement accounts.  It shields the money from most calculations for financial aid purposes but the most important part:

TAKE CARE OF YOURSELF FIRST.  Just like when on an airplane and they warn parents to put on their own oxygen mask first before their child's - if you aren't secure you can't help your child.
One of the best things you can do for your children is to ensure that they will not have to spend from their income to take care of you in your old age.  If your retirement is fully set then you don't have the money to give away.

In the instance that the parent IS taking care of themselves, but also wants to take care of their children what good is putting the money into a retirement account going to do when college comes around? Most parents are NOT retirement age when their children go to college. As a matter of fact, I can only think of a handful of people I know that will be 59-1/2 when one of their kids is college age...

It has been a while since I looked at the FAFSA numbers but I believe that the expected contribution rate of money in the childs name is 20% or so per year while the expected contribution rate on money in the parents name is 5% or so per year.  Probably better off keeping most money in the parents name.

NickV has the correct answer.  Max out a Roth IRA each year in your name and you can withdraw your contributions for any reason (including college expenses) penalty and tax free.

Check out youth savings accounts.  I was recently looking into this for our 3 year old.  Some banks offer very high interest rates (4% or more) for kids under 18.