Investment for newborn Grandchild

A few years ago someone said if you invest $10000 or something when a child is born they will be amillionnaire at 65. Does anyone remember how that went? Thank you. Sorry about the errots...I forgot my glasses

its 2000, at birth, and they will have a million at age 60 , with a 6% AVG. GAIN this is what I've done for my grand kids

I bet it was you! . Thank you.

Invest in inflation, it's the only thing going UP!

Now I wonder...what will a million buy $60 years from now?

This is a conversation I had with a friend a while back. He said the same thing along these lines......if an initial investment of $2k or $10k whichever was made at birth and allowed to grow at an assumed 6% through their lifetime, they would be millionaires.

So the question I then had is, why am I investing in my three children's 529 education accounts? Should I be taking the monthly amount that I invest in their 529's ($300 each/per month) and invest it in something more permanent with the idea that they shouldn't touch it until their retirement?

My thought is that by investing in a 529 account, they will come out of college or trade school with little to no debt. Versus coming out with $50k, $100k or more in debt and starting their career/life in debt. I think about the monthly loan payments they'll be paying on college debt, the interest, etc. and it makes me think that 529's are still the clear way to go.

Your thoughts?

Yes, if they are the type of kid that comes out of college with usable education.

If they decide to go to collage or if they do and actually complete a degree they can make a living with very dropping out. Or getting a gender studies degree.

I just have monthly deposit automatically go into my boys brokerage accounts.

Not sure I understand your thought Providence. Ya or nay on 529’s?

So you currently invest in a non-529 account for your child? Are the tax benefits better for that versus a 529? How about penalties for drawing out early if they use it for education? I suppose if you have the right investments the return could be better than a 529?

Put it in bitcoin !! Google it according to the lefty reporting it will be worth 1.1 million in 7 years...LOL LOL

Sort of depends on the state you are in. May be a tax benefit but maybe not.

Also, within a 529 you may not have as many investment options as in a brokerage account or a Roth. I went with a custodial brokerage account for each of my granddaughters

How do you invest for someone else? I would like to do this for my baby.

Just open a custodial account at your brokerage. You can set the age limit at which the child can access the account and you can name the "custodian". You or baby's mom or even a third party. You will need t set up "trading authorizations " for those persons who will/might be making trades in the account. Each broker may be slightly different in that respect but generally SEC has set the regulations. Then just fund the account with a check.......OR if you also have an individual brokerage account at the same broker, you can sometimes transfer stock or cash from your portfolio to the child's account. It can be cheaper that way once in a while depending on what you are trying to do

Just sayin...when I was 17 and graduated I was the most irresponsible 17 yr old in Nebraska. I my mind let the kid figure out life and by 60 they'll be a little wiser. In my case.

I am not one for having restrictions or limits on things. So I don't wory about tax benefits of a 529. Instead I just put in in the brokerage account and can do what we want with it and when with less government involvement.

Edit; may not be the best way to invest but, it's how I do things.

We have put in an amount each year for our 3 granddaughters into colledge funds. The oldest two are 15, the youngest 11. The one granddaughter now has enough as her parents have put a lot fo her as well, so we are hiring her to do work for us and we created an IRA account for her.
Even with the recent significant down trend the amounts for college have grown nicely.

Bryce

Nice. Lots of ways to go about it.

Thanks for the clarification and thoughts Providence.

Bryce, the 529 college accounts are what we’re currently using. Even within a 529 there are many options. Our end goal is to try and have half of each of our kids college/trade school paid for for them by the time they graduate high school.

As many have stated, there’s lots of ways of going about it. Personally, I was a first generation college grad in my family. I never had less than three jobs through college to pay for tuition, room and board, and beer. I was glad that I had to work my way through college or I wouldn’t have appreciated and worked as hard to get my degree. That said, I would be a lot farther along financially in life if I wouldn’t have come out of college $20,000 in debt.

Ya gotta hope they don't get divorced too. Never know.

Donna and I set up custodial accounts for all our grandkids (we no longer buy them Bday or Christmas gifts but rather put that $$$ in their accounts in the form of purchased shares of SPYG) which they may access at age 21.

We've done this for 14 years for the oldest and the $50/year has accumulated to thousands.
And the grandkids and their parents get a quarterly statement from TDA so they can follow their portfolios.

It's actually pretty fun.
Blessings,
Mark

If you are just somewhat aggressive you can do a lot better than 6% annual over the long term, and with what you are talking about, time is on the kid's side.
Just remember the "rule of 72".
Take 72 and divide it by your rate of return; that is how many years it takes for you investment to double.
For example:
72 divided by 6(6%) equal 12 (12 years), 72 divided by 10(10%) equals 7.2 (7.2 years), etc., etc..

We have used the 529 plans for all three, but two have no tax breaks as we felt there were more options for growth there. Several years later with our youngest there were more options so we have one that is state tax free.
Atrapper, I too find this investing thing new to me. I moved away from home at 14 to work so my mom could manage and work with the 4 younger siblings. Worked all through HS, College then militry and finally in the world of vull time civilian work. Never inherited a cent and had to learn all this investing, saving , money management as I worked. No one in my background had any monies to manage so I had to learn all of that and have mostly taken a conservative approach that matches my lifestyle as well. I feel really grateful that we can really help our kids and grand kids because a generation or two back there was none of that for us.
I am by admission not the smartest investor but one thing I do is manage the 90% or 95% that I spend each year so I can keep my cost of living lower as that to me is as important or more so than trying to find the best funds to move in and out of etc.

Bryce

I started a 529 plan for my son when he was born and put in $50 a paycheck. He had $35k for college when he graduated. I also started a Roth IRA for him when he was about 10 and he is now putting his own money into it for his retirement fund. I retired at 55 so he knows it can be done if he continues to save!

So they don't blow it all at once, u can set trust up for 1/3 at age 25, 1/2 at age 30, and remainder at age 35. That way if they make a bad move early, they have time to recover.

ours stays in our control until we died, the parents know nothing of these accounts. if the child goes way were, then chances are they probably will never know about them, we want them to learn about life have some struggles, we believe that they will appreciate it more , just my opinion

Can one of you guys share a Program or Broker name that can/will take that 2000 and handle it for the newborn until they are adults??

I have a grand Niece on the way in April and this sounds like something that I could get done for the little tike. I would rather do a lump sum of about 2k upon her birth and not have to do any maintenance or Required additional payments.

Perhaps call TDA and set up a custodial account. That's what we did. We put it in one fund that tracks with the S&P 500 (SPYG) but you can talk to them about various funds of that nature.

We still have 529s for both kids but stopped contributing to them as the portfolios of investments were very limited. We opened two brokerage accounts and those have performed better. With a brokerage account you have the entire stock market to choose from.

Example is I could invest in Tesla, Apple and Microsoft in a brokerage account. The world of stocks is your choice.

In a 529, I get a bucket of choices and those are my only choices. I cannot invest in the above stocks. The tax difference is negligible when you consider the scope of possible gains.

The key is getting a smart investor who will treat your investments as his own and follow your risk tolerance. That is the hardest thing to find.

This is something I would strongly recommend you NEVER do. What you are talking about is called discretionary trading authority. A broker must have written permission from you to make any trades either buy or sell, and also the approval of the brokerage firm. Many people had given these permissions prior to the crash of 1987. There were lots of law suits and disciplinary actions against brokers who made lousy and unauthorized trades during that time.

If you were to pursue granting this authority you should first investigate the person to whom you are giving permissions. See how long they've been doing this and check their licenses. Be sure to check for disciplinary actions against them. FINRA maintains a data base of all this information

If what you want is active professional management of an account for a child I would suggest an index mutual fund . That will give you professional management, oversight, and diversification at the outset. Any of the large mutual fund families can provide that for you. All trading within the fund will be done by professional managers. The account paperwork will address and explain that trading authority.

Just tell them what you want to do and they can guide you into the correct LEGAL vehicle. It may be an UGMA or UTMA or just a joint account with you and the minor as account owners.............also as Mark says a custodial account with a broker like TDA will work also.

Please do not give discretionary trading authority to any individual that you do not personally know well.............other than as described above in the case of a mutual fund