Savings for Child?

[confusedxx]

Hey guys,

I am expecting my first child in May 2010. One thing I desperately want to do for my child is to begin a portfolio for him and only tell him about it when he is 30 or so (past the age when he might want to spend it on a pimped out car or some other item that is not a real asset).

We live in Switzerland, but I am a US citizen, so I can get him a US Social Security number. However, living abroad might also give alternative investments free of capital gains taxes

I have thought about the following potential savings vehicles for my son, but I am not sure which or which combination would be best. Can you advise?

1. EUIL (Equity Indexed Universal Life) - an insurance policy which is free of taxes and used as a savings vehicle. Typically it has a floor of 0% and a ceiling of 15% pegged to the S&P500 index.

2. Trust fund - but who should manage it, what are advantages of trust vs just opening an account in his name and keeping it secret?

3. Open a Joint Account at Think or Swim and buy in different indexes and just let it grow for him

4. Buy DRIPs (Dividend Reinvestment Stocks) for him in stable companys and add to the holdings slowly ($100 a month) over time (e.g Coca-cola, McDonalds, GE, and other good companies which have raised dividends consistently during past 20 years).

It would be important to avoid adding complexity due to US tax issues. I am not so keen to prepare tax returns for a 1 year old and to continue that for the next 30 years Plus I expect during the first 10+ years the capital gains and account values will be quite small

However, if I open accounts in the US, same place where my accounts are, then I do not want him to be put into a position of tax evasion because he has built up a portfolio of investments during his life and has a million dollar portfolio - he knew nothing about.

What advice can you give for an Expat to help give his child a head start in life?

[disneysteve]

Forget about life insurance as an investment. And also forget about life insurance for a child at all. Enough said.

Not sure what Think or Swim is so I can't comment on that one.

DRIPs are worth considering but it depends how much money we are talking about. If a small amount, at least initially, I'd recommend the diversification that comes from a mutual fund. With DRIPs, you need a fairly large investment to get decent diversification. With mutual funds or ETFs, you can start with as little as $100 and have instant diversification.

I don't know the exact dollar amount, but children don't have to pay income tax on earnings until those earnings exceed a certain amount. I seem to think it is in the neighborhood of $700.

[banditfist]

1) Life insurance: No reason at all. The fees will eat you alive.
2) Go see an estate planning lawyer
3) I use Think or Swim as my broker. For what you are looking for, there are much better alternatives like Schwab or Fidelity. They allow you to buy ETFs (their family) with no commission. TOS is going to charge you for every transaction. TOS is much better for options and their charting platform is topnotch. TOS is also a daytrader's paradise. You don't indicate that you want to do any technical analysis.
4) Would be a good way to teach him about investing, but a large-cap ETF does about the same thing.

As for keeping it a secret....no.
Avoiding US capital gains and taxes....no freaking way. Does not matter what country you are in. If you are a US citizen, you owe.
You will have to file income taxes the same way if he earned more than $15 in a savings account.