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Treasury notes
Posted on 3/8/17 at 12:28 pm
Posted on 3/8/17 at 12:28 pm
I have a little over 20K in my daughter's savings account. She is 2. My wife and I contribute to it monthly, and we add all of her birthday and Christmas money to it. Her grandparents have been very generous. My dad thinks I should buy a couple of 10 K treasury notes as I will likely not need the money for some time (until college). We can easily pay for her private school when the time comes. (We are actually getting a break from the cost of say care when she goes to Catholic school.)
I really don;t know much about these notes and what they do or how to purchase them. as stated, the money will either sit in the account which is a very low interest yielding account or go into something like a treasury note
Any advice is a appreciated.
I really don;t know much about these notes and what they do or how to purchase them. as stated, the money will either sit in the account which is a very low interest yielding account or go into something like a treasury note
Any advice is a appreciated.
5
Posted on 3/8/17 at 12:38 pm to CoachChappy
quote:
I will likely not need the money for some time (until college
Why not dump it into a 529? Louisiana will give some sort of matching contribution, and the yields should be at least on the level of your savings account, in the most conservative investment.
Posted on 3/8/17 at 12:42 pm to CoachChappy
I think what you're actually wanting to look at is called treasury strips or zero coupon bonds. They're usually bought at deep discount and mature at par value, the owner would pay a phantom income tax however.
These are kinda an old way of funding a specific goal for something in the future with a lump sum. But since you mentioned your adding to this monthly, you may wanna check out some different investments within a UGMA/UTMA or 529 account. Depending on what you specifically want the money to do.
These are kinda an old way of funding a specific goal for something in the future with a lump sum. But since you mentioned your adding to this monthly, you may wanna check out some different investments within a UGMA/UTMA or 529 account. Depending on what you specifically want the money to do.
Posted on 3/8/17 at 12:45 pm to Shepherd88
quote:
Depending on what you specifically want the money to do.
Grow at a slow but steady rate. It's just a basic savings account that we are going to use for paying tuition for school and later college. As we can afford her school tuition now, we wanted to place the money in something instead of it just sitting there.
Posted on 3/8/17 at 12:49 pm to Smalls
quote:
Why not dump it into a 529?
I don't want to ear mark the money for education only. If she gets a scholarship or doesn't need to full amount for school. I don't want to be penalized. If there is extra in the account after college, we will use it for a wedding or car or even help on a first home.
Posted on 3/8/17 at 1:20 pm to CoachChappy
Do you still want control of the money for your benefit? Or do you mind making it a gift to your daughter for completely her benefit?
Posted on 3/8/17 at 1:24 pm to Shepherd88
Right now the account is in her name and I am the custodian of the account. I'm not sure if that answers your questions at all.
Posted on 3/8/17 at 1:31 pm to CoachChappy
Ah got ya, that's what I was leading up to. Custodial account is what I would've done as well.
As far as investments are concerned it sounds like you have at least a 10 year horizon to use this money for maybe high school expense and then another 6 years after that for college expenses.. so I'd be cautious on buying bonds for a goal that far out. If you're risk tolerance is low for this then at least look at a balanced mutual fund. If you're looking to maximize your return then you can look at throwing some index funds in there.
Are you managing this yourself?
As far as investments are concerned it sounds like you have at least a 10 year horizon to use this money for maybe high school expense and then another 6 years after that for college expenses.. so I'd be cautious on buying bonds for a goal that far out. If you're risk tolerance is low for this then at least look at a balanced mutual fund. If you're looking to maximize your return then you can look at throwing some index funds in there.
Are you managing this yourself?
Posted on 3/8/17 at 1:32 pm to Shepherd88
quote:
Are you managing this yourself?
Yes, like I said, it's just a savings account at the teacher's credit union.
Posted on 3/8/17 at 2:56 pm to CoachChappy
just buy QQQ and enjoy dividends and crazy growth 
Posted on 3/8/17 at 3:28 pm to CoachChappy
T-Bills, T-Notes, T-Bonds are the same. They refer to different time intervals.
Savings Bonds are different from above and different depending on the series purchased.
They are exempt from stat income tax but you have to pay federal.
You can purchase directly from the Treasury at Treasury Direct or you can open an account with a brokerage which may or may not charge you commission for purchasing these in your account.
Obviously, do your own due diligence with respect to where you should be in the yield curve.
I recently read up on Series I and Series EE savings bonds.
Series I is attractive because it locks in your real rate of return. The problem is that real rate of return is currently 0.00%. I wouldn't buy as-is. If the real interest portion of the Series I savings bond ever returns to something attractive, I plan to purchase aggressively. You're limited to $10,000 in purchases per SSN per year.
Series EE is attractive because it, at a minimum, doubles the face value at 20 years which is a 3.50% or so rate of return (compared to the 20 Year T-Bond at 2.85%). It also doesn't have the price risk. It obviously has inflation and liquidity risk. You're limited to $10,000 in purchases per SSN per year.
High yield CDs are 1.70% to 1.90% for 5 year terms. You can start a ladder which would be able to take advantage of rising rates (if it comes to fruition).
Savings Bonds are different from above and different depending on the series purchased.
They are exempt from stat income tax but you have to pay federal.
You can purchase directly from the Treasury at Treasury Direct or you can open an account with a brokerage which may or may not charge you commission for purchasing these in your account.
Obviously, do your own due diligence with respect to where you should be in the yield curve.
I recently read up on Series I and Series EE savings bonds.
Series I is attractive because it locks in your real rate of return. The problem is that real rate of return is currently 0.00%. I wouldn't buy as-is. If the real interest portion of the Series I savings bond ever returns to something attractive, I plan to purchase aggressively. You're limited to $10,000 in purchases per SSN per year.
Series EE is attractive because it, at a minimum, doubles the face value at 20 years which is a 3.50% or so rate of return (compared to the 20 Year T-Bond at 2.85%). It also doesn't have the price risk. It obviously has inflation and liquidity risk. You're limited to $10,000 in purchases per SSN per year.
High yield CDs are 1.70% to 1.90% for 5 year terms. You can start a ladder which would be able to take advantage of rising rates (if it comes to fruition).
Posted on 3/8/17 at 4:24 pm to Mossive
Posted on 3/9/17 at 9:22 pm to CoachChappy
There is a major problem with this approach.
You need to find a monetary instrument that outpaces inflation. Typical inflation is 2.5% - 3.0% a year. College tuition inflation averages around 8% per year. If you aren't averaging that kind of return, you are essentially losing money as it relates to purchasing power. In this case, the purchase is tuition.
I'd recommend a very stable, low cost mutual fund if you are risk averse. One that focuses on low volatility, consistent dividends to reinvest and preservation of principal.
Otherwise, you are at risk from an angle that lots of folks don't consider. Purchasing power or interest rate risk.
Good luck.
You need to find a monetary instrument that outpaces inflation. Typical inflation is 2.5% - 3.0% a year. College tuition inflation averages around 8% per year. If you aren't averaging that kind of return, you are essentially losing money as it relates to purchasing power. In this case, the purchase is tuition.
I'd recommend a very stable, low cost mutual fund if you are risk averse. One that focuses on low volatility, consistent dividends to reinvest and preservation of principal.
Otherwise, you are at risk from an angle that lots of folks don't consider. Purchasing power or interest rate risk.
Good luck.
This post was edited on 3/9/17 at 9:23 pm
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