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Recommendations on an investment account for a newborn
Posted on 4/17/23 at 2:56 pm
Posted on 4/17/23 at 2:56 pm
Wife and I had a daughter last week. I’d like to start out putting ~$100/month into an account and increase that number as we get older and continue to make more money. In a perfect world she will use the accumulated $$ in her mid to late 20’s on a wedding or down payment for a house. We currently bank with Capital 1 so I’d like to stay with them if possible but no big deal if not. Any recommendations on what type of account/investment would be best for her in the long run? Thank you for any input 
This post was edited on 4/17/23 at 3:56 pm
12
Posted on 4/17/23 at 3:00 pm to redneck
Do not put money in a savings account - you will get destroyed by inflation over 20 years. I'd open an account with whichever investment platform of your choosing (Fidelity, TD Ameritrade, Schwab, etc) and do an auto $100/month contribution into a total stock market index. Over 20 years the compounding growth should be sizable.
Posted on 4/17/23 at 3:05 pm to redneck
I assume you're already saving for her college?
Posted on 4/17/23 at 3:07 pm to redneck
First off, congratulations!
Second, why not a brokerage account and just do a growth allocation etf? 25 years is a long time to be in a savings account. Can link it to Cap One and transfer money into it pretty easy. Odds of you being with Capital One in 25 years seems unlikely anyway.
Second, why not a brokerage account and just do a growth allocation etf? 25 years is a long time to be in a savings account. Can link it to Cap One and transfer money into it pretty easy. Odds of you being with Capital One in 25 years seems unlikely anyway.
Posted on 4/17/23 at 3:52 pm to TigerTatorTots
quote:
Do not put money in a savings account - you will get destroyed by inflation over 20 years. I'd open an account with whichever investment platform of your choosing (Fidelity, TD Ameritrade, Schwab, etc) and do an auto $100/month contribution into a total stock market index. Over 20 years the compounding growth should be sizable.
Thanks. This is the type of info I was looking for. Will look into it
Posted on 4/17/23 at 3:54 pm to UpstairsComputer
quote:
First off, congratulations! Second, why not a brokerage account and just do a growth allocation etf? 25 years is a long time to be in a savings account. Can link it to Cap One and transfer money into it pretty easy. Odds of you being with Capital One in 25 years seems unlikely anyway
Thank you! When I said “savings account” I just meant some sort of an account or investment that won’t be touched anytime soon. I will edit/clarify in the OP. I returned to work today after a rough night and my brain is fried.
Posted on 4/17/23 at 4:55 pm to redneck
I did an Alaska college 529 for both my kids . It worked and I am on year 3 for my grandson .
Posted on 4/17/23 at 5:18 pm to redneck
Utma account. The only issue is when they are of age that money is 100% theirs and if they want to spend it on bookers and blow you can't stop them.
Posted on 4/17/23 at 6:35 pm to GEAUXT
Any benefits to a UTMA account over a traditional brokerage?
Posted on 4/17/23 at 6:46 pm to redneck
529. If its not used for college you can fund first few. years of Roth IRA after graduation with the remainder. Up to $35k currently. you can also take penalty free withdrawals up to any scholarship amount.
If you get to point of over funding 529 just use a taxable brokerage. I'd probably just keep it in parent's name instead of an UTMA. More control if she's not ready for it at 18. Plus, it wont count as much against FAFSA. Taxes on the small dividends from a total market or S&P 500 index ETF shouldnt amount to much so doubt there's much upside to UTMA.
Unless you've already got your retirements and her college funded I'd focus on those before investing extra for a wedding etc
If you get to point of over funding 529 just use a taxable brokerage. I'd probably just keep it in parent's name instead of an UTMA. More control if she's not ready for it at 18. Plus, it wont count as much against FAFSA. Taxes on the small dividends from a total market or S&P 500 index ETF shouldnt amount to much so doubt there's much upside to UTMA.
Unless you've already got your retirements and her college funded I'd focus on those before investing extra for a wedding etc
This post was edited on 4/17/23 at 7:03 pm
Posted on 4/17/23 at 7:04 pm to TigerTatorTots
quote:
Any benefits to a UTMA account
Because money placed in an UGMA/UTMA account is owned by the child, earnings are generally taxed at the child's—usually lower—tax rate, rather than the parent's rate.
Up to $1,050 in earnings tax-free.
The next $1,050 is taxable at the child's tax rate.
This post was edited on 4/17/23 at 7:05 pm
Posted on 4/17/23 at 8:40 pm to redneck
We did a 529 for both my kids.
$300/mo. each from birth. I will give up some things for my kids to keep that rate. My wife and I am still dogged by SL but we don't want that for our kids.
If each kid can get $110,000-$120,000 a piece for college we'd be ecstatic and feel like we did one measure better than our parents did us.
Get TOPs. Go to med school or law school. Have all or half paid for. What a leg up in life.
Then our kids can do one measure better than we did them.
$300/mo. each from birth. I will give up some things for my kids to keep that rate. My wife and I am still dogged by SL but we don't want that for our kids.
If each kid can get $110,000-$120,000 a piece for college we'd be ecstatic and feel like we did one measure better than our parents did us.
Get TOPs. Go to med school or law school. Have all or half paid for. What a leg up in life.
Then our kids can do one measure better than we did them.
This post was edited on 4/17/23 at 8:42 pm
Posted on 4/17/23 at 9:25 pm to DiamondDog
We chose a similar path with the 529. Non regrettable decision for me to fund it each month without ever touching it.
Posted on 4/17/23 at 10:21 pm to redneck
I used the Louisiana 529 start program for my kids and am funding for my grandson now. If you live in Louisiana, you can get an income tax deduction of $2400. After that, when the children start having income you can start a Roth IRA for them. Check out Paulmerriman.com for more info
Posted on 4/17/23 at 10:44 pm to lynxcat
quote:
Non regrettable decision for me to fund it each month without ever touching it.
What?
Posted on 4/17/23 at 10:45 pm to Louie11
We did tge LA Start. Depending on your income, state gives matching funds. Of course, they give the most to poor kids...cause government.
We get the bottom 2% because of our incomes.
But thats a free 2% added to your amount each year. Better than nothing.
We get the bottom 2% because of our incomes.
But thats a free 2% added to your amount each year. Better than nothing.
Posted on 4/18/23 at 12:00 am to redneck
Look into a custodial account. Uses are not restricted for educational funds. Can be used at your discretion.
Posted on 4/18/23 at 3:39 am to DiamondDog
That’s actually pretty awesome and cool for low income parents.
Posted on 4/18/23 at 8:42 am to redneck
Hey redneck - 529s are good. Also consider Coverdell ESAs that grow tax free like a Roth IRA. Contribution limit $2000/yr subject to income limits
Posted on 4/18/23 at 6:35 pm to Billy Blanks
It’s an automated withdrawal every two weeks.
The funds automatically rebalance as closer to college age.
It’s on complete autopilot and requires zero effort on my part.
The funds automatically rebalance as closer to college age.
It’s on complete autopilot and requires zero effort on my part.
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