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Started By
Message
Dad needs help investing a high school graduation gift.
Posted on 5/11/19 at 5:16 am
Posted on 5/11/19 at 5:16 am
I want to give my son who is graduating high school next week, a cash gift. He’s a hard worker and a great student, and has a full ride to LSU. After asking for ideas, I’ve decided that I’d like to help him invest around $2500 that he can’t touch, say for at least four years, but that he could watch grow and contribute to intermittently, getting a head start, like I never did. Then hopefully upon graduation, he can do with it what he wants, keep it rolling or divest it. The problem is that I don’t know the first thing about investing on my own, outside of a 401k. What are your suggestions and advice for these above parameters to get me started? Obviously I am late to the game getting this going, as I would like to have this for next weekend. I can answer any questions that I have not given answers to previously if that is needed. Any help would be appreciated.
9
Posted on 5/11/19 at 6:28 am to Sheepdog1833
Open an on-line brokerage account with a discount broker. I use Fidelity. Vanguard seems to be preferred here. Schwab would also be fine. Might need to check the minimums but I think $2500 is sufficient. Could consider using whoever services your 401k as long as they are cheap.
If it is a gift, you will probably open it in your sons name. However, this would mean he would control the money and could withdraw it whenever he chooses.
Once the money is deposited, the two of you can discuss where to put it. Since you are not an experienced investor, you and or your son should read the sticky so that he can understand the risks and potential returns associated with various asset classes such as stocks, bonds and cash.
Finally, if your son has an income, you may want to consider if he qualifies for opening a Roth IRA. This would allow him to develop an appreciation for tax consequences associated with investing. This understanding coupled with an early appreciation for compounding returns and time in the market could be a powerful gift. I wish I had developed the same at his age.
If it is a gift, you will probably open it in your sons name. However, this would mean he would control the money and could withdraw it whenever he chooses.
Once the money is deposited, the two of you can discuss where to put it. Since you are not an experienced investor, you and or your son should read the sticky so that he can understand the risks and potential returns associated with various asset classes such as stocks, bonds and cash.
Finally, if your son has an income, you may want to consider if he qualifies for opening a Roth IRA. This would allow him to develop an appreciation for tax consequences associated with investing. This understanding coupled with an early appreciation for compounding returns and time in the market could be a powerful gift. I wish I had developed the same at his age.
Posted on 5/11/19 at 8:22 am to Sheepdog1833
I second the other guy's recommendation: The most powerful thing you can do at that kid's age is to take advantage of the low tax bracket if they have income.
Put it in a Roth (They can take back out what they put back in at no penalty as long as they don't touch growth, but I'd strongly not recommend it in this case due to the tax advantage)
VGSTX through vanguard is a good, low balance fund/starter portfolio.
Put it in a Roth (They can take back out what they put back in at no penalty as long as they don't touch growth, but I'd strongly not recommend it in this case due to the tax advantage)
VGSTX through vanguard is a good, low balance fund/starter portfolio.
Posted on 5/11/19 at 8:51 am to Sheepdog1833
Open a Fidelity account. Buy $1000 of FXAIX (fidelity S&P 500 index fund)
Pick 3 or 4 large companies you both know and like that also pay a dividend and buy shares.
Some to consider:
Verizon (VZ)
AT&T (T)
Johnson &Johnson (JNJ)
Wells Fargo (WFC)
Bank of America (BAC)
General Motors (GM)
This will teach him how mutual funds, the stock market, stocks and dividends work.
If you put it in his name he can use it whenever he wants to though.
Pick 3 or 4 large companies you both know and like that also pay a dividend and buy shares.
Some to consider:
Verizon (VZ)
AT&T (T)
Johnson &Johnson (JNJ)
Wells Fargo (WFC)
Bank of America (BAC)
General Motors (GM)
This will teach him how mutual funds, the stock market, stocks and dividends work.
If you put it in his name he can use it whenever he wants to though.
Posted on 5/11/19 at 9:15 am to Sheepdog1833
Buy your son the book Richest Man in Babylon
ETA: My apologies, didn’t read topic correctly
ETA: My apologies, didn’t read topic correctly
This post was edited on 5/11/19 at 9:16 am
Posted on 5/11/19 at 9:19 am to Sheepdog1833
quote:
Obviously I am late to the game getting this going, as I would like to have this for next weekend
Not at all, not a biggie if you don’t have something that significant before graduation day. $2,500 is a good bit of money and will be a great gift no matter what you use it for. I’d recommend starting a Roth for him but others on here will have good or better opinions.
Posted on 5/11/19 at 10:23 am to Sheepdog1833
does he have any income? If so
Roth IRA with Fidelity, then pick a index fund
Fidelity has index funds with no fees and no minimums
Roth IRA with Fidelity, then pick a index fund
Fidelity has index funds with no fees and no minimums
Posted on 5/11/19 at 2:23 pm to Sheepdog1833
Another benefit of Roth is it won't count against him for financial aid calculations on FAFSA. I'd put it in a total market or S&P 500 mutual fund or ETF w Vanguard or Fidelity. While you're at it open yourself a Roth if you don't have one already.
Posted on 5/13/19 at 2:36 pm to TorchtheFlyingTiger
Thanks all
Posted on 5/13/19 at 8:17 pm to Sheepdog1833
Stash or Acorn account and give them a couple of hundred to start investing. Also, I gave my kid an Uber app with my credit card attached when started school. I promised that as long as they used the card instead of driving I would never ask questions. He used it a few times his freshman year. A few more times as a soph. Once as a junior and none senior year. Overall probably costed me $300 max - but no DUI’s or accidents paid for itself... and he was very thankful.
Posted on 5/14/19 at 6:49 am to Sheepdog1833
The best performing asset this year is Bitcoin.
I think you’ll have a hundred bagger in 10 years.
I think you’ll have a hundred bagger in 10 years.
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