Lux Investing
What Would Be The Best Way To Invest Money For My 7 Year Old Son?
My seven year old son has a savings account with about $300.00 in it. I want to start investing money for him so when he is an adult he will have a nice savings that he can build on. I would like to give him an opportunity to have money to buy a home, for education, for retirement, to reinvest, etc. I'm not quite sure about the stockmarket because it's not doing very well right now. What about mutual funds or an IRA account?
Public Comments
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- For an IRA, he has to have earned income. The stock market is down so you don't want to invest in it?!?!? WRONG!! BUY LOW, sell high. when the market is DOWN, that is when you want to invest in it. I would look into buying him some good quality stock mutual funds, but they have minimums. The only way you will be able to get into a mutual fund is if you agree to automatically add $25 or $50 to it every month (which you should). Contact fidelity, or any of the big mutual fund companies and see if they can help. Once you do, resist the urge to move the money around based on market indicators. Stick to it for the long haul. Put the same amount in every month to the same fund. Good luck and congrats on hetting him off on the right foot!
- You can't open an IRA for him unless he has earned income (you can hire him as an employee to meet the requirements for base income required as long as you document the compensation): http://moneycentral.msn.com/content/Taxes/Preparationtips/P33215.asp You can open a custodial account for him with a brokerage firm and invest in a mutual fund (even a basic money fund may pay more in interest than your standard savings account) - the minimums for a custodial account are generally far less than standard accounts - and you can start an automatic draft to invest every month. You can open a 529 college savings plan: http://www.savingforcollege.com/529_plan_details/ http://www.kiplinger.com/basics/archives/2003/02/529faqs.html
- Let your son think about his future home, retirement, etc. Invest in a College Savings Fund (529 Plans). These plans are specifically for investing saving that will used for college. So your 7 year old son has 11 years until he goes to college. Invest in a 529 College Saving Plan, and the money will be working all 11 years until your son needs them for college. This is what I HIGHLY recommend you do. Help your son get a degree, then he can worry about his home, retirement on his own. Make sure you teach him financial literacy early!! Google "529 College Savings Plan"...
- Now is a great time to be investing in stock mutual funds. If you want to use your investment for college you can invest it in your states 529 plan and the investment will grow tax free. Your son is 7 which means you probably will have more than 10 years to allow your invest to grow. Stock mutual funds are a perfect vehicle for that time frame. You could also open a non college account also using stock mutual funds and save for other goals (house, car, etc). In order to invest in an IRA you son needs to have earned income. I hope he is not working at age 7! Most investment companies will allow you to open an account with as little as $250 and add to it $50 monthly. Please email me at richardjackel2000@yahoo.com if you would like more specific and detailed mutual fund and 529 plan recommendations. Please be sure to include your state of residence in you email. 529 plans are state specific.
