#Savings #Investing #FinancialPlanning #FutureGoals
Are you a parent thinking about the best way to save money for your child’s future? 💰 It’s never too early to start planning for their financial well-being, and setting aside money for their future needs is one of the most important things you can do. In this article, we’ll discuss the best ways to put money away so that when your child turns 18, they will have something substantial to start their adult life with.
### What is a goal amount to save up?
Determining how much money you want to save for your child’s future is the first step in creating a financial plan. The amount you aim to save will depend on various factors such as your current financial situation, your child’s future needs, and your long-term goals. It’s essential to set a realistic goal that is achievable within a specific time frame.
### What’s a good way to invest?
Investing is a great way to grow your savings over time and potentially reach your savings goal faster. Some popular investment options to consider include:
– **529 College Savings Plans**: These plans offer tax advantages and allow you to save for your child’s education expenses.
– **Mutual Funds**: Mutual funds offer diversification and professional management, making them a suitable option for long-term savings.
– **Stocks**: Investing in individual stocks can be a way to potentially earn high returns, but it also comes with higher risk.
### Is a CD a good choice?
Certificates of Deposit (CDs) are a low-risk investment option that can help you earn higher interest rates than traditional savings accounts. They are a suitable choice if you want to keep your savings safe and earn a guaranteed return over a specific period.
### Should I just give her some of my stocks?
Giving your child stocks as a gift can be a great way to introduce them to the world of investing and help them grow their wealth over time. However, it’s essential to consider the tax implications and consult with a financial advisor before making any decisions.
### Can I give a baby a brokerage account?
Opening a brokerage account for your child can be a smart way to save and invest money for their future. It allows you to purchase stocks, bonds, mutual funds, and other investments on behalf of your child. However, keep in mind that your child will gain full control of the account once they reach the age of majority.
### Is a piggy bank full of cash still an option?
While a piggy bank full of cash may seem like a simple and traditional way to save money for your child, it may not be the most effective method for achieving your savings goal. Consider exploring other investment options that allow your money to grow over time.
### Is 250k too low of a goal? Too high of a goal?
Setting a savings goal of $250,000 for your child’s future is a substantial amount that can go a long way in helping them achieve their financial goals. However, it’s essential to consider your financial capabilities and your child’s future needs before determining if it’s the right goal for you.
In conclusion, the best way to put money away for your child’s future is to start saving and investing early. By setting realistic goals, exploring different investment options, and consulting with financial experts, you can create a solid financial plan that will provide your child with a strong financial foundation when they turn 18. Remember, it’s never too early to start planning for your child’s future! #FinancialPlanning #InvestingForKids #SavingForTheFuture
You can always gift money to her at that time. Put money into one of your own brokerages (maybe even create a separate account) and when she turns 18 you can just… give her the money.
Also remember that while lots of 18 year olds are very mature and smart and responsible…. a lot of them are still total knuckleheads when it comes to money.
You can also look into 529 accounts which are used as college funds, or I-Bonds which are tax free when spent on education costs.
Be careful about putting anything in the child’s name alone. It becomes theirs whether you want it to or not. Money is a blessing to most people, but, to some, it’s a burden. There’s no way of knowing what it will be for her when she’s old enough to have it. If you want, put the money in an account that is hers *in your mind* but still technically owned by you. You can then give the money in any amount you see fit.
Just save the money yourself. If you need to compartmentalize you can open a separate account to put it in. Given the time frame a brokerage account would be appropriate. A 529 plan is also a good option (better in some states than others) which provides some tax benefits.
I’m not an expert in finances, but I would recommend not telling her about it.
Handing $250k to someone who just turned 18 may not be a good idea
Focus on your savings and when your child turns 18 or 23 or ??? you can decide what, if any, financial assistance makes sense.
Of all your options, the brokerage account is best. The money will grow as invested. Not sure if you will do $250k now or over time but either way, make sure its in invested in funds/etf so that it will be a nice chunk in 18 years.
529 invested in index funds
529 for college. This can also be rolled into a Roth IRA if it is not entirely used for college expenses. So like a double benefit, save for college and the extra is rolled into a Roth for retirement. Depending upon how much you save, the kid could be worth millions growing tax free over 65 years. And the money would be tax free when the child hits 65(the Roth IRA money can be withdrawn without penalty at 59.5 years old)
So, I’m no expert but an ETF comes to mind. This way, she’ll have some “cushion” at that age. Obvious we have no idea what the future holds. I’m 28 and prices have doubled in my life time (even more, as of late, and don’t get me started on college). Just as an example, a 10K fund growing at an annual rate of 8% (which is pretty conservative at that nearly two decade scale, comes out to just under $40,000 which she can use for college if you as a family think it’s best, a down payment for a house of her own to generate equity, or even a business if that’s the path she decides.
Just an idea.
I’ve taken the opposite approach, I make verbal contracts with my 3 year old. Whenever he wants a piece of candy i’ll say,
“Okay, but if i give you this candy, you owe me $1,500 when you turn 18. Deal?”
He always says yes, he already owes me close to 50k, I video record these conversations so he can’t deny it happened.
I would talk to a financial planner about setting up a trust if you’re talking about a quarter of a million dollars or maybe more.
Recommend a custodial brokerage account invested in a low fee index that follows the s&p500 or total market like fxaix from fidelity or similar from vanguard. Simple and easy.
If you want to have a lil fun with this idea… if you start/have a family business you can technically employ your kid, which then gives them income, which thus lets them open a (custodial) Roth IRA. And since $12,500 is the standard deduction for income tax, the $7k you pay them this year (the max allowed for a 2024 ira) is tax free, and grows tax free in a Roth IRA, which if left til they retire at 65, will accrue a massive massive amount of gains. Play around with a compound interest calculator to see!
Check out the boom Elements of Investing if you want to learn more. I found it straight forward and well explained.
Annuity? T-bills? I’d start with those. An average CD won’t appreciate very much
529 would be my recommendation, unless you are loaded and she wont have to work….88% of all millionaires in America have a 4 year degree, make sure she gets the ticket unless you are funding her future
Goal amounts can vary. I didn’t have a goal I just saved it all.
You can opt a custodial brokerage for your child. I would invest in market index etfs things like VOO or Vti. Etc.
I also opened a UTMA custodial HYSA for my kids and would occasionally open CDs of rates were good.
I wouldn’t give your stocks. Just buy her own.
A piggy is a good way when they are 4-7 to see the money saved then after a few months you can go deposit it. As the age appropriateness levels come use then a teaching moments about save some spend some and to show how it grows etc.
When they start earning income you can open a custodial Roth as a great jump start for retirement.
Snd as others said best thing to do is make sure you are set so the burden doesn’t fall on them.
Make sure you’re saving for her to go to college, not having to take any student loans was probably the best gift my parents ever gave me. I wouldn’t plan on just handing over a large pile of cash when she turns 18, but I think saving money to give to her when she gets to milestones like buying a house would be good. Maybe you’ll teach her well but 18 year olds with a lot of money don’t tend to be the most responsible with it, I know if someone had given me that much money at 18 I probably would’ve had a new car and spent way too much of it partying in college. Give her the means to make her own money and take care of herself, that’s going to be a lot more valuable than just giving her money
God some of this advice is really bad.
Do not put money into a CD or high yield savings account. The returns will be <5% which is garbage compared to what you could get from index funds (7+% on average – the S&P500 is up way more than that this year, though granted it’s a bit of an anomaly). iBonds? No
Look into tax advantaged accounts and talk to a fiduciary advisor or CPA. A 529 may be appropriate, or an UTMA/UGMA, but be aware you need to set a “termination age” for the latter – which varies by state – so at, say, age 18, your kid will take control of the account. If they want to liquidate everything and buy a new pair of Nikes you will be unable to stop them.
Source: am a stockbroker
Put it in a 529. If she ends up going to college there are tax breaks otherwise you can just withdraw it and give it to her for anything else,
Help with college. Don’t give an 18 year old any money. Put that away for when they turn 50 and might need it.
Are you maxing out all your retirement options? You could open a roth for yourself that is targeted for her. (in your head) How old will she be when you turn 59 1/2?
Also, you can open a roth in her name once she starts working. So she 16 flipping burgers for bling money and you are matching her earned income into a retirement acccount. WIth a Roth she can pull out the principle without penalty and any remaining gains will just sit there and continue to gain.
Besides the money, you’ve really set her up for success psychologically with a retirement account already growing before she finishes college.
1) make sure your own retirement etc is good
2) open a 529 plan and contribite/invest the same way you do your retirement. This can pay for college/trade/grad school fully (by far the biggest first financial hurdle) and she can take out the value of any scholarships tax free. If you over save and have anything leftover you just pay the tax and 10% penalty on the earnings
3) you can use a regular HYSA or CDs for some less optimized but more liquid savings
4) Invest in her ability to take care of herself financially by talking about money, good money habits, work ethic etc.
5) once she is older and makers her own money you can open a custodial Roth Ira
Are UGMA (Uniform Gift to Minor) accounts still a thing? Years ago an account could opened if registered as an UGMA. The adult was the account holder and the child the included as the minor. The account was held until the kid turned 18. Not sure if they are still available but if so that is another savings avenue for you & your daughter. Congratulations on being a good parent to your little girl.
>Best way to put money away so when my kid turns 18 she will have something.
IMHO, the best way is to fund a 529 plan. That encourages further education and helps ensure they can graduate without debt. A college education is a gift that keeps on giving.
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>Is 250k to low of a goal? Too high of a goal?
(shrug)
What is your income? Will you be fully prepared to fund your own retirement? That should be determined first so that you won’t become a burden on your children.
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>I don’t know how expensive the future will be.
Nobody does. We can only be sure it will be “more”.
>What is a goal amount to save up
As much as you possibly can.
>What’s a good way to invest?
Custodial Brokerage account. VTSAX and forget it.
>Is a CD a good choice?
Today it’s not bad, but you will have to monitor the situation for the life of the investment. I don’t think CD is a viable long term solution
>Should I just give her some of my stocks?
No?
>Can I give a baby a brokerage account?
Yes. Custodial Brokerage accounts for minors are a thing, most firms have them.
>Is a piggy bank full of cash sill an option?
the worst option.
>Is 250k to low of a goal? Too high of a goal?
Neither. Your goal should be what you can afford to save/deposit/transfer every paycheck for 18+ years. And you can only afford it if you can afford it after you are saving at least 20% of you income for yourself and your retirement.
Throw cash into a safe etf like VOO.
I set up a brokerage account for each of my sons but they are in my name. I’ll transfer them to them once I see that they are financially responsible.
If you have the means, do a Roth IRA for your kid. Throw some money in there each year, and it’ll blossom. By the time she’s old enough, there will be a significant amount compounded, and she can actually use some of it without penalty to buy a house, or for a nice down payment. With prices of houses these days homeownership gets harder and harder. But with this, she could easily get something, and then she’s not stuck renting endlessly, plus it would serve as a long term investment that will build more wealth.
I have an UTMA for my son that I put $60/week into. I’d rather see him spend/invest the money on something other than an overpriced college education, so I stayed away from a 529
With that said, 529s are quite flexible, and many people here will disagree with my opinion to go with the trust. 529s are a good option for many
There are two questions: what to invest the money in and what kind of account to put it in.
Invest it in a diversified mutual fund. The kind of account could be 529, UTMA, or just an account in your name you have earmarked for this purpose. I think 529 is the best option, even for babies, until they reach a point where you know there’s more money in the account than they can use on education. The rules are liberal on what you can use it for. If you use it for something ineligible, you pay taxes on the gains. You pay taxes almost anytime you make money on something, so this isn’t a huge drawback.
Give your kid the gift of you retiring without the need of any financial or other help from them.
We started a 529 a year before our first son was born. We started one for each of our other two sons as each was born. We contributed what we can for each every month, first $100/‘month and increased as we get pay raises. As each finished their studies, we rolled the unused portion from our oldest to our second and then to our third son. By the time it is all said and done, all three finished college without debts. We did tell our boys starting their HS year that we will fund their college if they attend state school, but if they attend private or out-of-state school, they will have to come up with the other 1/2 of the costs. This is our legacy to our boys.
I created individual accounts in my brokerage…add 1 kid to each account as beneficiary…invest as normal.
Saw a post once that read something along the lines of “Let me tell you how I gave my drug addicted kid 70k when he turned 18”.
People and situations change…setting up your investments so that you can control it till the very end is ideal.
S&P500 index fund. Any of the flavors will work.
I have not read all the replies. what You are trying to do is noble. I would caution you that you should not give money to any child at 18. If you want to pay for their education then sure pay for the education. At 18 they will likely be irresponsible and will not be a good steward of large sums of money just do to their age
I contribute to all of these. My intention is for my child to be able to pursue passion rather than paycheck.
529 or state-specific alternative for college fund
UTMA/UGMA brokerage account for retirement head start
HYSA for car, house down payment, other new-adult expenses
Piggy bank to start financial education
For long term, open her up a custodial account. I use Schwab. In GA, her accounts move to her (taxable and Roth) at 21 which is this month. I used an S&P500 fund and deposited money every month which was auto-invested. He portfolio has a lot more going on after 20 years of investing but we still use the S&P fund. She also have a 529. I have used her brokerage account for a couple things: school trip to Japan, 1/2 of her car at 16, major car maintenance, and to fund her Roth when she has W-2 income.
$250K is high. My kid has $200K.
MY dad did college funds and has money set aside/available also in his own savings/investments to help with things.
College fund right out of the gate is nice. Its lovely not having student debt. The funds can also be used for trade school and other forms of education if college is not the route they pick.
Then when I bought a house and was settled for a little while, he paid it off. You might want to do something like this rather than hand an 18 year old a stack of cash. See how they make decisions, what they need, etc.
My parents purchased stocks for me, tracked the value, and then gave me the amount in cash, which i put into a brokerage and bought most of the same stocks I “owned” through my dad. He gave me about 1/3rd of it when I turned 20, and the other 2/3rd once I graduated college and had “either a job or substantive future plans.” Aka a job offer or serious plans to enroll in graduate school or do a gap year of travel.
I’d suggest a 529 account. Probably aim for $100k to account for most college expenses when they turn 18, but it’s not the end of the world if you don’t get to that goal.
Just trickle it in a few hundred a month at a time, and before you know it, both your daughter and the 529 will be all grown up.
An easy 1up for her would be to add her as your authorized user on one of your no annual fee credit cards, as long as you are good at making payments. That way, when she’s 18, she’ll have 18 years of good credit history.
You could create a trust for her and create an investment account. Put money into various safer funds to grow over the years. Work with a fiduciary that could set it up so she couldn’t pull all the funds as soon as she turns 18.
Advice from personal experience: don’t. Raised my step-daughter since she was 7. I felt we did everything right. We (her mom and myself) stressed the need to be fiscally responsible, use money to plan for the future. What we were able to save for her we had hoped she would put towards her college.
She instead decided to blow all of it on a trip to Hawaii that she didn’t tell anyone about and we didn’t even know she was leaving until she was there. Obviously she was 18 so legally couldn’t do much but she missed the last three weeks of school for her Senior Year, spent every penny she had, quit her job, could not pay for her car insurance, got into a car accident when she got home and is now over $40k in debt from her first year of college. She also doesn’t know if she wants to finish or not.
Her life, not mine, but it hurt to see everything her mom and I worked for to help her out completely squandered. Granted she was still going to take some loans out because we only had about $20k saved up. Spent about $8k on a car that was totalled in the accident, another $1500 for a laptop for school. $2000 to fix her credit issue from getting scammed online after being unemployed and falling for a quick money scam on Instagram.
Again, it was a gift with the best intentions but once you hand over cash it isn’t your decision on what happens to it. I would say if you are looking to help keep the money aside and when your child asks you to help financially with something then do that.
Her dad signed on for a student loan to cover the last 3 semesters of school and that is where the $40k debt comes from but I am reading the room on that one and she won’t have enough to finish. She is already debating not working next school year since she has another windfall now. She is out shopping and generally being an adolescent which is fine but has 0 foresight.
Her mom and I decided to not continue to help her financially because of how she acted with what we gave her. Her dad doesn’t see an issue with anything which is why he cosigned her loan. My wife and myself are making popcorn for the inevitable show.