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Posted: 1/16/2011 10:14:35 AM EDT
My daughter, who is two, has accumulated about $1300 from grandparents and great grandparents over the past two years. Right now it is sitting in our checking account, but I would like to open an account for her somewhere where she can earn a little on that money until she turns 18. Can a minor child have a CD or is there another option? What about savings bonds or treasury bonds? Thanks
Link Posted: 1/16/2011 10:16:31 AM EDT
Our children's grandfather bought a savings bond with an investment company for them when they were born, $1,000. When they reach 20, it matures. My son hit 20 this year and he received $5,600 bucks.

Not bad.
Link Posted: 1/16/2011 11:31:10 AM EDT
Yes, a child can hold investments. It is done in the form of a trust. CDs, savings bonds or treasury bonds are all potential choices.

But, if she has a 16 year investment horizon, a good broad based index fund would have a much better return. Safe means one thing short term, but over the long term, it loses its meaning. Anything that would destroy the S&P 500 16 years from now is also going to destroy the value of any CD, savings bond, or treasury bond.

My grand parents went the savings bond route. They lived through the Great Depression. I do believe my life would be richer right now, (in several meanings, not just wealth), if they had taken another approach. In their defense, in the 1950s, that just wasn't done. I am glad that times have changed.
Link Posted: 1/16/2011 7:26:40 PM EDT
Be aware that if/when your child goes to college, these funds will be used to calculate eligibility for financial aid. The more savings she has, the less "free money" she will receive in grants. In addition, when she turns 18, she can spend it any way she wants. I recommend keeping the funds in your name.
Link Posted: 1/17/2011 8:03:48 AM EDT
This.
Unless you are sure you will be able to pay for college 100 percent, it is better to keep the money in your name for now. My wife and I opened a seperate CD for now with money from the grand parents to track the intereste seperatly. The wife wanted something "safe" as well. interest is laughable at like 1 percent. but since I am only batting about .500 on the stocks right now, it is safer to her.

Originally Posted By Averagebear:
Be aware that if/when your child goes to college, these funds will be used to calculate eligibility for financial aid. The more savings she has, the less "free money" she will receive in grants. In addition, when she turns 18, she can spend it any way she wants. I recommend keeping the funds in your name.


Link Posted: 1/17/2011 1:11:54 PM EDT
Originally Posted By Andrewh:
This.
Unless you are sure you will be able to pay for college 100 percent, it is better to keep the money in your name for now. My wife and I opened a seperate CD for now with money from the grand parents to track the intereste seperatly. The wife wanted something "safe" as well. interest is laughable at like 1 percent. but since I am only batting about .500 on the stocks right now, it is safer to her.

Originally Posted By Averagebear:
Be aware that if/when your child goes to college, these funds will be used to calculate eligibility for financial aid. The more savings she has, the less "free money" she will receive in grants. In addition, when she turns 18, she can spend it any way she wants. I recommend keeping the funds in your name.




That is a great point to consider since we likely won't be able to pay for more than a little of our kids college. I guess I will look at finding a fairly safe investment and put it there. Thanks for the tips everyone.
Link Posted: 1/17/2011 4:37:26 PM EDT
Originally Posted By grendelbane:
Yes, a child can hold investments. It is done in the form of a trust. CDs, savings bonds or treasury bonds are all potential choices.

But, if she has a 16 year investment horizon, a good broad based index fund would have a much better return. Safe means one thing short term, but over the long term, it loses its meaning. Anything that would destroy the S&P 500 16 years from now is also going to destroy the value of any CD, savings bond, or treasury bond.

My grand parents went the savings bond route. They lived through the Great Depression. I do believe my life would be richer right now, (in several meanings, not just wealth), if they had taken another approach. In their defense, in the 1950s, that just wasn't done. I am glad that times have changed.




This.

Look into a 529.
Link Posted: 1/17/2011 4:50:03 PM EDT
Yep look into 529, might want to look at what it will cost to fully fund, and mention the account to the grandparents.

VA in-state schools are running $25K per year total including books, room, board, etc.

Originally Posted By lugnut428:
Originally Posted By grendelbane:
Yes, a child can hold investments. It is done in the form of a trust. CDs, savings bonds or treasury bonds are all potential choices.

But, if she has a 16 year investment horizon, a good broad based index fund would have a much better return. Safe means one thing short term, but over the long term, it loses its meaning. Anything that would destroy the S&P 500 16 years from now is also going to destroy the value of any CD, savings bond, or treasury bond.

My grand parents went the savings bond route. They lived through the Great Depression. I do believe my life would be richer right now, (in several meanings, not just wealth), if they had taken another approach. In their defense, in the 1950s, that just wasn't done. I am glad that times have changed.




This.

Look into a 529.


Link Posted: 1/23/2011 7:52:26 AM EDT
[Last Edit: 1/23/2011 7:53:28 AM EDT by UncleGAK]
If you really want to do you daughter a lifetime favor, invest the $1300 + more if you can if Proctor & Gamble stock (PG). Set it up to automatically reinvest the dividends. Once you're set up with the dividend reivestment you can also purchase stock directly at a minimum of $50. She'll have a serious downpayment for a house in 30 years or a nice start towards retirement IF she's financially responsible.

I inherited 100 shares of PG about 22-25 years ago. I set up the dividend reinvestment (DRIP) immediately. I've never done direct stock purchase. The dividends increase every year. My number of shares have doubled about every 7 years. With stock prices down, you get more shares for your DRIP.

I never paid for the stock (except taxes on the dividends), so I treat it like it's not mine. If I make it through life and never have to touch it, I'll be happy to pass it on to future generations. Odds are at some point the I'll take the dividends as actual income and hopefully never touch the stock.
Link Posted: 1/25/2011 7:30:16 PM EDT
Originally Posted By UncleGAK:
If you really want to do you daughter a lifetime favor, invest the $1300 + more if you can if Proctor & Gamble stock (PG). Set it up to automatically reinvest the dividends. Once you're set up with the dividend reivestment you can also purchase stock directly at a minimum of $50. She'll have a serious downpayment for a house in 30 years or a nice start towards retirement IF she's financially responsible.

I inherited 100 shares of PG about 22-25 years ago. I set up the dividend reinvestment (DRIP) immediately. I've never done direct stock purchase. The dividends increase every year. My number of shares have doubled about every 7 years. With stock prices down, you get more shares for your DRIP.

I never paid for the stock (except taxes on the dividends), so I treat it like it's not mine. If I make it through life and never have to touch it, I'll be happy to pass it on to future generations. Odds are at some point the I'll take the dividends as actual income and hopefully never touch the stock.


That's good thinking!
Link Posted: 1/27/2011 10:26:18 PM EDT

Originally Posted By Averagebear:
Originally Posted By UncleGAK:
If you really want to do you daughter a lifetime favor, invest the $1300 + more if you can if Proctor & Gamble stock (PG). Set it up to automatically reinvest the dividends. Once you're set up with the dividend reivestment you can also purchase stock directly at a minimum of $50. She'll have a serious downpayment for a house in 30 years or a nice start towards retirement IF she's financially responsible.

I inherited 100 shares of PG about 22-25 years ago. I set up the dividend reinvestment (DRIP) immediately. I've never done direct stock purchase. The dividends increase every year. My number of shares have doubled about every 7 years. With stock prices down, you get more shares for your DRIP.

I never paid for the stock (except taxes on the dividends), so I treat it like it's not mine. If I make it through life and never have to touch it, I'll be happy to pass it on to future generations. Odds are at some point the I'll take the dividends as actual income and hopefully never touch the stock.


That's good thinking!

Yes, much better than bank accounts with interest rates like they are. Set up a DRIP account and keep shoveling money into it.

http://www.directinvesting.com/search/no_fees.cfm?from=lc
Link Posted: 1/30/2011 8:36:59 AM EDT
Take a look at your state's 529 plan, or perhaps a Coverdell account. You can park the money long term there, and it will be tax free coming out. As to what to invest in, for a young one I would probably go 20% bonds and 80% stocks.

Originally Posted By jtl0101:
My daughter, who is two, has accumulated about $1300 from grandparents and great grandparents over the past two years. Right now it is sitting in our checking account, but I would like to open an account for her somewhere where she can earn a little on that money until she turns 18. Can a minor child have a CD or is there another option? What about savings bonds or treasury bonds? Thanks


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