Saving for child

[jaxx66]

I would like to start some type of savings for my child that is NOT for college (that is already taken care of). I would prefer some type of investment where I can invest in mutual funds. Does anyone have any thoughts on what type of investment and what investment company I could do this through?

THANKS!

[disneysteve]

What is the purpose of this money and what is your timeline? If you have at least 5-10 years before the child would be needing to tap this money, equity mutual funds would certainly be appropriate. Vanguard has a $3,000 minimum except for their STAR fund which is $1,000. I believe T. Rowe Price has a lower minimum if you sign up for automatic monthly investments. There are other mutual fund companies that have low minimums also.

All of that said, make sure that you are taking care of yourself first. You need to be putting at least 15% of gross income into your retirement savings, 5% into other savings, be debt-free and have a 6-month emergency fund. If you aren't doing all of that, I'd suggest not worrying about putting money away for your child at this point.

[jpg7n16]

See DS's post first - and if that's all covered:

The type of account best suited for you would be what's called an UTMA account (Uniform Transfers to Minors Act). Specifically, an UTMA Brokerage account.

Any brokerage should be able to set one up for you. You'd have to see them for account specifics. Here's an example from Fidelity:

Custodial Account (UGMA/UTMA)

And the account at Vanguard: https://personal.vanguard.com/us/wha...nguardugmautma



Note that these are different than 529 accounts. 529 accounts are for college (which you don't need). These are just normal taxable brokerage accounts, but held in a custodial account until the minor is of age to legally handle their own money.

For more specifics, you should ask your investment representative.

From: https://personal.vanguard.com/us/wha...nguardugmautma

Key benefits of an UGMA/UTMA

• You can contribute as much as you want, but amounts above $13,000 per year ($26,000 for a married couple filing jointly) will incur federal gift tax.
• Anyone can open or contribute on behalf of a child.
• There is no penalty if account assets aren't used for college.

UGMA/UTMAs at a glancePoints to consider

• These are custodial accounts with assets held in the child's name, so contributions are irrevocable.
• Upon reaching the age of majority, the beneficiary can use the assets for any purpose—educational or otherwise.
• There is a significant impact on federal financial aid. The account is treated as the child's asset and weighed more heavily in financial aid calculations.
• You can't change beneficiaries.
• Contributions aren't tax-deductable.
• Earnings are subject to federal income or capital gains tax.

[moneybags]

Don't forget that money in your child's name is not a good thing when applying for financial aid for college. How old is your child? If they are old enough to work & have a job, you could fund an IRA or Roth IRA for them (based on their earnings). This would not be taken into account when applying for fin aid.