Grandparent investing 1k - what to do? - Page 1

[ARCHIVED THREAD] - Grandparent investing 1k - what to do?

Posted: 4/26/2016 12:36:03 AM EDT

So my mom is insisting on giving my 5 year old $1000 into some account or another. She wanted to just start him a "checking" account. I know we can do better than that. I don't think $1k that Im not going to contribute to any time soon is worth tying up in a 529. Plus I dont like 529s. I asked that she look at Roth IRA's, specifically one in my name that I can then pass on to him. I would at least periodically be contributing to that so it could grow a little. She doesnt need to access it. I dont need to access it. Its just a little something for him from Grandma for later in life or whatever. Anyone have any thoughts on a good place for this?

Posted: 4/26/2016 1:00:47 AM EDT

[#1]

Nice AR15

Posted: 4/26/2016 1:15:02 AM EDT

[#2]

Buy them $1000 stock in a company they love or familiar with and let them watch it grow as they get older. Can be a great lessen and teach them a bit about investing.

Posted: 4/26/2016 1:19:09 AM EDT

[#3]

get the money from her, and put it into an Online brokerage. Pick a mutual fund or ETF, spin the wheel.

Posted: 4/26/2016 1:22:24 AM EDT

[#4]

The simplest thing would just be to open a Roth in his name funded with the $1,000 gift from Grandma. As long as she isn't giving him >$14,000 (annually) there will be no gift tax.

I'd do it at a place like Vanguard, Fidelity, USAA, etc. in their S&P500 fund (ETF).

Posted: 4/26/2016 1:23:32 AM EDT

[#5]

Buy a good dividend stock and reinvest the dividends and watch them grow.

Posted: 4/26/2016 2:33:27 AM EDT

[#6]

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Buy a good dividend stock and reinvest the dividends and watch them grow.

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JNJ

Posted: 4/26/2016 3:05:07 AM EDT

[#7]

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Nice AR15

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That probably would turn out to be the best investment...provided it isn't seized at some point.

Posted: 4/26/2016 3:31:42 AM EDT

[#8]

S&P500 ETF with dividends/capital gains reinvested.

Tell your son where/what it is and how to track its value (it'll be relatively easy since it's mentioned almost nightly in the news).

By the time he's 18 it should almost triple in value.

Posted: 4/26/2016 4:25:40 AM EDT

[#9]

Quote History

Quoted:
Buy them $1000 stock in a company they love or familiar with and let them watch it grow as they get older. Can be a great lessen and teach them a bit about investing.

View Quote

Disney. Your son will love the certificate - get one share delivered and the rest in a brokerage account owned by a Trust (Grandma can be the Grantor, you the initial Trustee) with him as the beneficiary initially, then as the Trustee when he turns 18 or 21. There will be taxes to be paid - the Trust will get a 1099-DIV every year. That's part of the downside of that approach. Other downside factors are things like if he turns out to be stupid with money, he could waste it on hookers and blow when he gets control of it. The up side is the money (less capital gains tax) would be available to him for a down payment on a house or something similar before he's one foot in the grave himself.

You could do the Roth IRA thing, but he won't be able to touch the money before he turns whatever arbitrary age the gov says he can retire. Unless the Democrats steal it first.

Posted: 4/26/2016 12:08:46 PM EDT

[#10]

You can't do an IRA contribution (Roth or otherwise) for the kid without the kid having earned income of at least that amount.
You could open a brokerage account at somewhere like Vanguard in the child's name and invest it in the Star fund ($1,000 minimum). There isn't much other offerings for that little dollar amount.
Another option is a savings account at an online bank like Ally where you can link it to your personal account and add/ deposit money to it from birthday gifts etc. over time. At least it earns some kind of interest unlike local banks.

Posted: 4/26/2016 7:59:54 PM EDT

[#11]

Vanguard S&P500 ETF

Don't tell him about it until he's about to retire.

Posted: 4/26/2016 8:13:57 PM EDT

[#12]

Quote History

Quoted:
The simplest thing would just be to open a Roth in his name funded with the $1,000 gift from Grandma. As long as she isn't giving him >$14,000 (annually) there will be no gift tax.

I'd do it at a place like Vanguard, Fidelity, USAA, etc. in their S&P500 fund (ETF).

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mind your mop, Andy!

ar-jedi

Posted: 4/26/2016 11:10:57 PM EDT

[#13]

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Quoted:
Vanguard S&P500 ETF

Don't tell him about it until he's about to retire.

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Ay uh, might tell him sooner than that. Ya know, so OP is alive to tell him.

Posted Via AR15.Com Mobile

Posted: 4/27/2016 1:02:33 AM EDT

[#14]

Good call on the trust being taxed annually. Thinking I'll keep recommending the Roth and point to the S&P500 ETF. Seems like the best no hassle use of it

Posted: 4/27/2016 1:57:56 AM EDT

[#15]

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Good call on the trust being taxed annually. Thinking I'll keep recommending the Roth and point to the S&P500 ETF. Seems like the best no hassle use of it

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Quoted:
Good call on the trust being taxed annually. Thinking I'll keep recommending the Roth and point to the S&P500 ETF. Seems like the best no hassle use of it

or a broad, low cost "index fund of index funds" such as FFNOX.

https://fundresearch.fidelity.com/mutual-funds/summary/31634R109
http://www.morningstar.com/funds/XNAS/FFNOX/quote.html
http://seekingalpha.com/article/3216076-ffnox-is-it-better-than-the-robo-advisors

Asset Allocations
AS OF 3/31/2016

Domestic Equity Funds 60.59%
++ Spartan 500 Index Fund - Investor Class 48.37%
++ Spartan Extended Market Index Fund - Investor Class 12.22%

International Equity Funds 25.07%
++ Spartan International Index Fund - Investor Class 25.07%

Investment-Grade Bond Funds 14.32%
++ Spartan U.S. Bond Index Fund - Investor Class 14.32%

ar-jedi

Posted: 4/27/2016 8:52:54 AM EDT

[#16]

Quote History

Quoted:
Good call on the trust being taxed annually. Thinking I'll keep recommending the Roth and point to the S&P500 ETF. Seems like the best no hassle use of it

View Quote

You could, but then you create a headache on the paperwork because it is not possible to make a contribution to a retirement account (Roth or traditional) without taxable income.

There is not account named a "Roth". Roth is a TYPE of account. There is Roth IRAs (likely what you are referring to), Roth 401K, Roth 403b, Roth457 and a few more I'm not listing because you should have got the point by now. There is also Traditional counterparts to all of these. Either way, you can not make a contribution to these type accounts without taxable income.

But what do I know? I'm just an Accountant.

Posted: 4/27/2016 9:01:21 AM EDT

[#17]

Etf. Pick a targeted retirement account

Posted: 4/27/2016 3:08:37 PM EDT

[#18]

Quote History

Quoted:
Good call on the trust being taxed annually. Thinking I'll keep recommending the Roth and point to the S&P500 ETF. Seems like the best no hassle use of it

View Quote

As said by others, you cannot set up a Roth in your child's name unless your child has income.

Easiest way in this situation is to set up a brokerage account for you child with grandparents or you (easier for tax reasons) as the custodian and start out with low fee index funds.

Posted: 4/27/2016 11:26:50 PM EDT

[#19]

If it was me and I wasn't looking to maintain anything (trade with it) I'd find nice steady growth mutual fund or ETF. Buy and check it once a year.

A slightly more complicated strategy would be to buy it and set a wide GTC trailing stop order. That way if the market took a huge dump the money would transition to cash before it finishes the crash. Wide order would keep it from triggering on daily or monthly ups and downs. Then when the major crisis passes you get back in. Once the trailing stop is set you ignore it unless your stop triggers or once a year (or so).

Disclosure: I've never tried the above. I'm a high maintenance guy.

Posted: 4/28/2016 10:42:08 PM EDT

[#20]

As I said in the OP, the Roth would be in MY name, to which I could then pass it down to him. I definitely want to set it and forget it. Have another IRA I already dont contribute enough to but at least its making better interest than a basic checking.

Posted: 5/5/2016 4:26:48 AM EDT

[#21]

Buy him 10 shares of CVX (or $1k of another dividend aristocrat) and DRIP the dividends. Don't give him the money until he is 25. By that time he should have a little financial sense.

Go here to see where his money will be in 20 years.