Best way to save for a newborn baby's future?

[puck36]

We are planning on having a baby and was wondering what is the best way to save for a newborn baby's future? I really don't want to do an ESA or 529 plan just in case they don't go to college but want to start something for its future.

[Jluke]

You could setup a ROTH account for yourself and earmark that money for the child.

You could set up a custodial account(s) and contribute to that... This could be savings/money market and/or an investment account.

You could set up a money market or investment account in your name, separate from any of your current accounts and earmark that for the child.

[kork13]

We are planning on having a baby and was wondering what is the best way to save for a newborn baby's future? I really don't want to do an ESA or 529 plan just in case they don't go to college but want to start something for its future.

A 529 still wouldn't be a bad thing.. I understand that they can be used for costs at trade schools & professional certifications, or you can always change the beneficiary to be yourself (masters degree?), or a cousin/sibling.

Excepting a 529, you can open a custodial savings account/UGMA/UTMA. Federal bonds (I or E bonds) are also a good option. I believe you can also open a custodial investment account (taxable) and put money in there. Alternately, just save/invest the money normally, and you'll have it that you can use for good benefit at any time in the future.

[Jluke]

alternate site thread

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=66073&newpost=3081621

[snafu]

For onset stage of a long term project without constrictions, I suggest opening a fee free, Exchange Traded Fund [ETF] account for 'Future.' Having established with the minimum required via INDEX, I'd Dollar Cost Average [DCA] sums to amass sufficient dollars to buy 100 shares of your choice of high risk ETFs like emerging markets or depending on economy... Junior gold, new technology or pharmaceutical.

Be ready for a roller coaster long term project. You will be re-assessing and making changes based on the economy of American and say European economic outlooks. [things are changing faster and faster] Plan to add a regular monthly or quarterly contributions plus 'found' money from dividends, capital gains, gifts, rebates, irregular income streams.

When your young adult is ready for disbursements, they will be withdrawn over time so basically a 25 year project. When we did a similar project we expected the actual contribution sums to double every seven years [read that somewhere]. We had far less choice [last century] but in some years gains were outstanding.

In the last five years we dumbed down to Index and lost lots of opportunity. You need to be able to sleep at night and not worry about finances.

[sblatner]

We saved for college in a separate savings account (i.e., money market, mutual fund, etc.) and are using it to pay for college. We didn't set up a 529 as they were pretty new when are kids were young and we didn't trust them :-). I have a friend whose daughter graduated high school in 2008 or 09 and her fund tanked during the stock meltdown. The money was supposed to be automatically moved to a lower risk fund and it either wasn't moved or it wasn't very conservative.

[Thrif-t]

I don't know if Savings Bonds(Series EE) are as good of a buy now as they were when I was buying them in the early 90's, but boy do I wish I had bought more. My company had a plan where I could buy so much every pay. Using the Treasury Direct site I found out that I bought $2800 worth and their value today is $6400.

I can cash these in and use them for my kid's college and don't have to pay interest on the earnings. BUT if you put the savings bonds in your kid's names they cannot use them interest-free for college until they are 24.

[kork13]

I don't know if Savings Bonds(Series EE) are as good of a buy now as they were when I was buying them in the early 90's, but boy do I wish I had bought more. My company had a plan where I could buy so much every pay. Using the Treasury Direct site I found out that I bought $2800 worth and their value today is $6400.

EE bonds are okay.... They have a pathetically low stated interest rate, but they are guaranteed to at least double in value at the 20 year mark. So if you buy a $1000 bond today, in 20 years you'll have at least $2000, no matter what happens with interest rates. It's effectively a 3.5% interest guarantee. But it only applies at 20 years, and if you out-earn the doubling, nothing happens.

[TexasHusker]

I wouldn't save for college anymore - future president Clinton is promising free college for anyone making less than $125K. So it's all good go and buy a new Range Rover.

[clatoden99]

1. By optimizing your monthly/regular expenses.

2. By decreasing spending on luxury items before buying them. For example, before buying a new smartphone, you might consider the benefits it would accrue and how much it would increase your value/productivity.


3. By investing in long-term wealth creating instruments - Fixed-income securities, PPF, Mutual Funds, Equity Stocks, Real Estate.


4. By systematically investing in the above instruments.

5. By investing a part of your saved money in value addition to yourself.

[james.hendrickson]

Don't forget about 529 plans - the sooner you contribute to these the more time you have in the market grow the amount you'll need for your baby's education later on.

[Jimmy84]

They are both excellent college savings vehicles because they are both tax-free when used for college.The benefit of the Coverdell is that it allows you to self-direct your investments, just like you might self-direct the investments in your IRA. A 529 plan, on the other hand, does not impose age limits, annual contribution limits or income limits like the Coverdell does and so overall we see a lot more money going into 529 plans than into Coverdells. Plus many people are happy with the investment choices offered by the 529 plans and don't necessarily want to self-direct their investments.