Child "actress" income

[elessar78]

So my kid (2 years old) was asked to be in a commercial and we are getting paid a modest amount. We don't have any immediate need for the money so I'm thinking about setting up an IRA or something like that, since it is earned income.

Anyway, any advice or other ideas on what to do with this money?

[disneysteve]

Open a Roth. I don't know what a "modest" amount is but let's say it is $500.

$500 invested with an annual return of 7% from age 2 to age 65 will grow to $47,000.

With any luck, this one job will lead to others and you can add to that account as more money comes in. Good luck.

[elessar78]

yes, $500. In fact. And yes, I was looking at it like that with the time value of it growing for 63 years. But it is possible to open a ROTH for minor and a one-time payment?

[elessar78]

Sorry, when we get paid, they've asked if we would like the check in her name or one of ours.

[Petunia 100]

yes, $500. In fact. And yes, I was looking at it like that with the time value of it growing for 63 years. But it is possible to open a ROTH for minor and a one-time payment?

Yes, it is possible. Its also a GREAT idea!

You are going to be limited in your choices with just $500. One option is the Pax fund family. They are a no-load socially conscious investment fund shop with a $250 minimum. I used their "World Balanced" fund PAXWX for my kids until they had enough to move to Vanguard.

Home | PAX World

[elessar78]

Not really. Schwab and other companies now have an option to start any Roth for as little as $100.

[disneysteve]

yBut it is possible to open a ROTH for minor and a one-time payment?

You nee to find a place with a low minimum and no ongoing fees. It would be nice if you could put it in a broad equity fund like a total stock market index but I'm not sure where you can do that with a small amount.

[Petunia 100]

Not really. Schwab and other companies now have an option to start any Roth for as little as $100.

Awesome! There you go, then. I suggest you choose a total market index fund, a global one if there is such an animal, and keep transactions to a minimum.

Best wishes to your daughter with her acting career.

[elessar78]

Awesome! There you go, then. I suggest you choose a total market index fund, a global one if there is such an animal, and keep transactions to a minimum.

Best wishes to your daughter with her acting career.

Hey, first I want to apologize if my last response seemed snippy. It wasn't meant to be. I was on my mobile phone and trying to keep the response short. When you responded I was looking at minimums on such funds and found the Schwab and others.

I think the total market and global ones are good advice. What about an SP500, is that diverse and simple enough (reduce turnover and transactions)? I think that's what you guys are going with with those suggessions?

[disneysteve]

I think the total market and global ones are good advice. What about an SP500, is that diverse and simple enough (reduce turnover and transactions)? I think that's what you guys are going with with those suggessions?

If you can invest as little as $100, I'd put $400 in a total US stock market index and $100 in a total international stock index. That will give you broader diversification than an S&P 500 fund.

[dczech09]

I agree with all of the advice stated. Just make sure the check is written out to the child and that you file a tax return on the child.

You have to file the tax return in the child's name in order to prove that there is an earned income that can be put into the Roth.

[jpg7n16]

You nee to find a place with a low minimum and no ongoing fees. It would be nice if you could put it in a broad equity fund like a total stock market index but I'm not sure where you can do that with a small amount.

Some IRAs at Fidelity will let you invest $500 into a mutual fund.

You can also go the ETF route and buy some index ETFs with no commission. I think Vanguard is the same, though I don't know their IRA minimums.

[kv968]

Scottrade offers a no-fee, no minimum IRA:

Scottrade

Schwab offers a custodial IRA with a $100 minimum and no fees:

Charles Schwab

Both also offer no-commission ETF's.

[moneybags]

Another advantage to the Roth is that when it comes time to go to college:

1. the money in the Roth will not be included in any financial need calculations (money in regular savings in your child's or your name is included)

2. the money can be taken out for college without penalty if you choose to

We did this with both our kids when they were little. The eldest is heading off to college in the fall and recently said "why didn't I work more when I was little?".