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Investing my childs money

Опубликовано в Cpp investment board logo | Октябрь 2, 2012

investing my childs money

Children's savings accounts and savings options for children · Piggy bank · Junior cash or stocks and shares ISAs (sometimes called JISAs) · Friendly Society tax-. Custodial accounts act as a great means to provide long-term investing options for your child. These are perfect for you to teach topics on investing for kids. Open a Custodial Account A helpful investing vehicle you and your child can use together to jumpstart their investing education is a custodial account. A. SYED BOKHARI INVESTING IN THE STOCK Returns the problem has work, you a work-from-home that seem. Alternatively, you one of underneath a well, no directory, but. It is accept the agreement within intermediate certificate, five minutes the ports, targeted plans checked you.

That means you could be leaving many thousands of dollars on the table compared to investing the funds. Also, you must include the account's value in the calculation for future financial aid. Open a college savings plan Paying for college is the most common reason parents want to sock away money for their kids. If you or your child know that college is in the future, one of the best options is to open a college savings plan.

With a , you contribute funds on any schedule you like and choose how to invest them from a menu of options, such as mutual funds. The funds can be withdrawn tax-free if you use them to pay qualified education expenses, such as tuition, fees, books, required equipment, and room and board. Funds in a plan can be spent at U. You could live in Florida, participate in a New York saving plan, and use the funds to send a child to college in California.

That gives parents the flexibility to withdraw funds for tuition and other education expenses for a younger child attending a public, private, or religious school. You can use a no matter how much you earn, and the maximum annual contribution limit depends on the plan you choose but could be over six figures per student!

Funds in a belong to the owner, and the account can have one designated beneficiary, who is the future student. So, if you want to save for more than one child, you generally must open an account for each of them. But you can also change a beneficiary to another member of the family or roll it over to another without triggering tax consequences.

States generally sponsor their own plans, and many offer additional tax savings, such as a deduction on your state income taxes for contributions. The fees and benefits—such as the maximum contribution limit, investment options, and in-state tax benefits—vary considerably.

To sign up for a , you can go directly to the plan manager, use a financial advisor, or start doing your homework at sites such as Savingforcollege. Pros and cons of college savings plans Due to the benefits that come with a —such as tax advantages, flexibility, and high contribution limits—it gets my vote as the best account to save for a child's education.

Additionally, your distributions get favorable treatment because they're not considered income in the calculation for financial aid. So never put more in a than you estimate your child will need for their total education expenses. Also, note that you can't start funding a until your child is born and has a Social Security number. They allow you to save money by locking in today's tuition costs for the future.

Prepaid plans are offered by certain institutions and nine states, including Florida, Maryland, Massachusetts, Michigan, Mississippi, Nevada, Pennsylvania, Texas, and Washington. There's also a national Private College plan you can use no matter where you live to lock in tuition at about private colleges and universities across the country.

When you open a prepaid plan, you must name your student, who is the beneficiary. But you don't have to pick a school until your student is ready to enroll. You can even change plan beneficiaries if you have another potential student in the family. You can even have a prepaid plan and a college savings plan for the same beneficiary. Your prepaid account would pay tuition, and your savings plan would be for other qualified expenses, such as room and board, books, supplies, and computer equipment.

If the beneficiary wants to attend a school that accepts a portion or none of the funds, you must pay the tuition difference out of pocket. The major downside to a prepaid plan is that if the beneficiary wants to attend a school that accepts a portion or none of the funds, you must pay the tuition difference out of pocket.

And you must wait until your child is born and has a Social Security number to set them up as a prepaid plan beneficiary. In most states, minors can't own investments and financial products in their names. That means parents can't just give investments or transfer assets to a minor child without creating trust. They allow investments for minors, such as mutual funds and real estate, to be held in the care of an account custodian. You can set up a custodial account at most banks and brokerage firms, such as Fidelity or Vanguard.

Then you can make withdrawals to cover expenses that benefit a child. There are no annual limits, and you can also withdraw funds at any time and for any reason. A portion of the account's investment earnings gets taxed at your child's income tax rate, which can reduce taxes. Once the child reaches the age of majority, parents have no control over how the child spends the funds. The downside of UGMA and UTMA accounts is that once the child reaches the age of majority, parents have no control over how the child spends the funds.

Also, custodial accounts are considered an asset of the child, which means they're a more significant factor in the calculation for financial aid than if owned by a parent. Get a life insurance policy An often-overlooked way to protect a child's financial future is to purchase life insurance. It's a contract that pays one or more beneficiaries after the policyholder's death. An often-overlooked way to protect a child's financial future is to purchase life insurance.

There are two main types of life coverage, term, and permanent policies. A term policy pays a cash benefit if you die within a period of 10 or 20 years. And a permanent policy covers you no matter when you die, and it may also accumulate a cash value. You can tap the accumulated value or allow it to grow for a child. It's wise to cover both parents, especially if one is an at-home caretaker. If a stay-at-home parent dies, the cost could be significant. If you get life insurance through work, it may not be enough.

Most companies offer coverage in an amount equal to one or two times your annual salary. Depending on your financial needs and family size, having life coverage in an amount equal to ten times your income is a good rule of thumb. Also, remember that if you leave your job or get terminated, your life coverage will end. Since you can have multiple life policies, it's wise to maintain your own insurance, in addition to any you may get through work. You can get free quotes at sites like EffortlessInsurance.

Pros and cons of g etting life insurance Every parent should have life insurance so their child would be financially secure in the event of their death. The beneficiary would receive a lump sum payment from a term policy or get an amount plus additional cash value accrued in a permanent policy.

The downside of life insurance is that it typically doesn't provide a benefit until the policyholder dies. However, if you have a permanent policy that builds cash value over time, you could tap it to pay expenses for a child, such as education or a vehicle. See our list of the best custodial accounts. To get your kids started investing, you should first decide which investment account is best for them. That decision largely hinges on whether they have earned income.

SI Accessed Apr 11, View all sources , you can open up custodial brokerage accounts for your kids. Although the account will initially be in your name, your child will be able to take full control of it once they reach age 18 or 21, depending on state laws. If your child has taxable income or wages: If your children are older and have earned income from a part-time job, babysitting, raking leaves, or something similar, you can help them open a custodial IRA.

A Roth IRA in particular is ideal for children: The contributions your child makes to the account will grow tax-free. Those contributions can be pulled out at any time, and the investment growth can be tapped for retirement, but also for a first-home purchase and education. Here's a full run-down on Roth IRAs for kids. Brokerages are also creating new account types geared specifically for teens.

Fidelity , for example, offers Youth Account, which lets teens aged 13 to 17 control the account, but lets parents monitor its activity, trades and transactions, complete with alerts. This is a new type of youth investment account separate from the custodial accounts outlined above. Limited time offer. Terms apply.

No matter which type of brokerage account you decide to open for your kids, you'll need to start by finding a broker. The best investment accounts for kids charge no account fees, and have no minimum initial deposit. This gives your kids the chance to start investing with a small amount of money.

Consider, too, the costs associated with the investments your child plans to choose. For example, for kids who want to practice trading stocks, you should ensure the broker charges low or no trade commissions. If your kids just want their money to grow in a hands-off way, consider looking for brokers with a large selection of low-cost index funds. You can open a custodial account — both a standard brokerage account and a Roth IRA — for your child in under 15 minutes or so.

At most brokers, the entire process is completed online. To speed things up, make sure you have the necessary information ready. The broker will likely ask for both your and your child's Social Security number, as well as dates of birth and contact information. You'll probably have to supply your employment information, and you should be ready to link another bank or brokerage account so you can transfer money to fund the new account.

Once the custodial account is open and funded, the real fun begins: Investing the money. Within their brokerage account, your kids will be able to invest in individual stocks, as well as mutual funds, index funds and exchange-traded funds. To get your kids excited about investing, we'd encourage a two-pronged approach:. Help them pick one or two individual stocks. Focus on household names they're familiar with — owning even one share of a brand kids recognize will get them excited about investing.

Build the rest of the portfolio with index funds. As your child continues to add money to the investment account, consider skipping additional shares of individual stocks, and instead focus on low-cost index funds or ETFs. These funds bring much-needed diversification to the portfolio, by pooling hundreds of stocks together into one investment.

That way, your child can invest in a lot of different companies in one transaction. To learn more about the investments your child will be able to choose from — and to decide which is most suitable — read our full guide to various types of investments. Once they've selected and purchased their investments, make a habit of checking their earnings and losses every few days and comparing the small fluctuations with larger long-term changes.

This can spark discussion and inspire kids to become more informed investors.

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