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    Default investing in childs future

    im due to have my daughter in a few weeks, and ive been looking into some type of long term investments that I can begin now. Im not the most financially savvy person, but i do read dollar den often and you guys are a huge help! From what Ive read on the internet it seems stocks would be a good way to go. However, Im a little intimidated by the stock world because like I said I dont know much about finance. Any advice on stocks or other long term investments that would be good to look into?

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    Default Re: investing in childs future

    If you don't know much about stocks but would like to get in the market, then I suggest a market index fund, like the Vanguard 500 Index Fund Admiral Shares. Index funds generally have low fees and do better than most managed funds.
    Last edited by eagle2; 08-14-2013 at 12:24 PM.

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    Default Re: investing in childs future

    A key up front question is this ... do you intend to irrevocably 'give' money to your child on an ongoing basis to make long term investments ( thus this money cannot be reclaimed by you for other use) , or do you intend to retain 'ownership' of those long term investments yourself such that you may ( or may not ) transfer ownership to your child at age 18 or 21 ? The answer to that question makes a big difference as to which types of investment vehicles are best suited for the situation.

    see

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    Default Re: investing in childs future

    My advice would be to do a lot more of what you are doing, asking questions and getting information. I'd recommend doing some research from books and online as well. The more you know the better decisions you will make.

    I'd also suggest to research a wide variety of investment and income producing options to see if you have an aptitude or interest in any particular areas. If there is something you like or find interesting you will likely put more time and learn more about it, which will usually lead to better results. I myself tend to stay away from stocks as I don't feel I have much control and they don't interest me. Real estate and starting low-cost passive income businesses however are fun and exciting to me. Good luck!

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    Default Re: investing in childs future

    dont do stocks if you know nothing about the market. get a 529 account. its specifically for kids education.

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    Default Re: investing in childs future

    ^^^ actually Vanguard and other brokerage services offer 529 plans which can hold stocks, bonds and other forms of investments. But my earlier question still bubbles to the forefront. A key decision which needs to be made 'from the git-go' is whether or not the parent is going to retain ownership and control of the savings / investments ( in whatever form ) with the intention ( but not the absolute obligation ) to transfer ownership to the child at age 18 or 21 or whatever ... versus the parent irrevocably 'giving' money over to the ownership of the child on a monthly / quarterly / annual / sporadic basis, thus making that money unavailable for any other use by the parent. This is even true where 529 plans are concerned, since either the parent or the child can be named as legal owner of the 529 assets.

    In our increasingly complicated world, this key decision has lots of 'fallout'. If the parent retains ownership of the child's savings / investments, any interest and dividend earnings are considered to belong to the parent and will be taxed at the parents' rate. Also, if a parent retains ownership of the child's savings / investments, that money is considered to be a parental asset which is potentially vulnerable to a future bankruptcy seizure, which could potentially affect parent's eligibility for means tested benefits, which could potentially be used as collateral for future loans etc. However, the parent retaining ownership of the child's savings / investments is just about the only way for the parent to assure that the child can't simply decide to 'blow' all of this money when it is dumped into their laps upon reaching age 18 or 21 or whatever. Granted that 529 plans do mitigate this a bit due to the tax exemption on plan interest and dividend earnings, as well as the future penalty charges if the plans' savings / investments are not actually used for college expenses.

    I would also add that 529 plan assets are now reported to FAFSA, with the future possibility that 18 years from now every dollar contributed to a 529 account may mean a 50 cent reduction in available student grant money.
    Last edited by Melonie; 08-15-2013 at 03:42 AM.

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    Default Re: investing in childs future

    ^True, but while the ones offered by Vanguard and others all receive beneficial federal tax treatment on earnings in those accounts, only 529 plans approved by one's particular state of residence enjoy the same state tax deferral on growth and many states will also allow you to deduct contributions (usually up to certain limits) only to approved plans. Indeed, in some states only a single approved 529 plan is offered.

    Vixe, below is a link to a 529 plan which seems to be "the" 529 plan "offered by the state of Georgia."

    https://www.path2college529.com/

    Now, as others have mentioned, distributions from these plans are really supposed to be for qualified educational expenses (college tuition, fees, books, etc.). That is not to say that you cannot get the money out if your child does not go to college, but you would take a hit on some of that money in the form of a tax bill for whatever is not used for college education.

    This is not tax or investing advice as I am not a professional at either. This is just one guy's thoughts fwiw.

    Good luck!

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    Default Re: investing in childs future

    Quote Originally Posted by jimboe7373 View Post
    My advice would be to do a lot more of what you are doing, asking questions and getting information. I'd recommend doing some research from books and online as well. The more you know the better decisions you will make.

    I'd also suggest to research a wide variety of investment and income producing options to see if you have an aptitude or interest in any particular areas. If there is something you like or find interesting you will likely put more time and learn more about it, which will usually lead to better results. I myself tend to stay away from stocks as I don't feel I have much control and they don't interest me. Real estate and starting low-cost passive income businesses however are fun and exciting to me. Good luck!
    Thank you for the advice. Ive been reading everything I can get my hands on lately about different ways of investing. I am also interested in real estate but it seems like a bit of a commitment. My father was a landlord and it seemed like he had to sink alot of time, money and energy into it.


    Quote Originally Posted by Melonie View Post
    ^^^ actually Vanguard and other brokerage services offer 529 plans which can hold stocks, bonds and other forms of investments. But my earlier question still bubbles to the forefront. A key decision which needs to be made 'from the git-go' is whether or not the parent is going to retain ownership and control of the savings / investments ( in whatever form ) with the intention ( but not the absolute obligation ) to transfer ownership to the child at age 18 or 21 or whatever ... versus the parent irrevocably 'giving' money over to the ownership of the child on a monthly / quarterly / annual / sporadic basis, thus making that money unavailable for any other use by the parent. This is even true where 529 plans are concerned, since either the parent or the child can be named as legal owner of the 529 assets.

    In our increasingly complicated world, this key decision has lots of 'fallout'. If the parent retains ownership of the child's savings / investments, any interest and dividend earnings are considered to belong to the parent and will be taxed at the parents' rate. Also, if a parent retains ownership of the child's savings / investments, that money is considered to be a parental asset which is potentially vulnerable to a future bankruptcy seizure, which could potentially affect parent's eligibility for means tested benefits, which could potentially be used as collateral for future loans etc. However, the parent retaining ownership of the child's savings / investments is just about the only way for the parent to assure that the child can't simply decide to 'blow' all of this money when it is dumped into their laps upon reaching age 18 or 21 or whatever. Granted that 529 plans do mitigate this a bit due to the tax exemption on plan interest and dividend earnings, as well as the future penalty charges if the plans' savings / investments are not actually used for college expenses.

    I would also add that 529 plan assets are now reported to FAFSA, with the future possibility that 18 years from now every dollar contributed to a 529 account may mean a 50 cent reduction in available student grant money.

    Good advice as always, Melonie. I think putting the money in my daughters name is what I would ultimately decide, but Im still thinking about it. I dont think Im ready to invest in stocks quite yet so Im going to stick to CD's for now until I get a solid grip on it. Do you have any books you recommend regarding investing?

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    Default Re: investing in childs future

    a good place to start is probably

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    Default Re: investing in childs future

    This is an excellent area for discussion , ideas etc.. It was reported last week that the average cost of raising a child ( WITHOUT paying for college ) is now just under $250,000. That is from birth to age 18.
    Last edited by Eric Stoner; 08-20-2013 at 06:17 AM.

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    Default Re: investing in childs future

    ^^^ while I would take issues with some of that study's methodology, in general it's hard to argue that raising a child will cost more than $10,000 per year ... in after-tax money ... providing that the parent is paying for all of the child's 'expenses' out of their own pocket. Not wanting to detour this thread, but such issues as after-tax money and potential eligibility for having 'someone else' pay for ( part of ) the child's 'expenses' actually factors heavily into the decision above.

    If the parent elects to maintain 'ownership' of money potentially slated to be given to the child at age 18-20 or whatever, then the parent must deal with the following facts ...

    - any income produced by this saved / invested money will be added to the parent's other income ... resulting in a potential higher tax bill for the parent thus less after-tax money versus the same pre-tax income level.
    - any income produced by this saved / invested money will be added to the parent's other income ... resulting in potentially lower eligibility for benefits ( i.e. free school lunches, SCHIP, etc. )

    If the parent immediately 'gifts' money to the legal ownership of the child ( with the parent maintaining a 'custodial' role ), then any income produced by this saved / invested money is considered to be the child's income. This is typically taxed at a lower rate. This also typically does NOT count as additional income when determining eligibility for benefits ( i.e. free school lunches, SCHIP, etc. ). But the money is in fact owned by the child, and can thus be used for any purpose whatsoever once the child reaches age 18, 21 or whatever and the 'custodial' role of the parent is automatically terminated.

    The 529 plan essentially 'bridges' these two extremes. Tax exemption on income produced by the saved / invested money takes the above negative tax consequences off the table. However, like gov't sanctioned retirement plans, the tax preferred status of this money means that the gov't attaches 'strings' to how the money may be used in the future ... with heavy penalties imposed by the gov't if the money isn't used for education or if the money must be withdrawn for other purposes prior to the child reaching age 18, 21 or whatever.

    And also like the gov't sanctioned retirement plans, the gov't retains the right to change future 529 plan rules at any time ... meaning that putting money in a 529 plan today may result in unforeseen consequences 18 years down the road ( like not being eligible for student grant money until all previously saved 529 money has first been entirely spent ). I'm not saying that such a 529 plan rule change is going to happen, but nobody can provide assurances that it CAN'T happen. Thus potential future gov't rule changes constitute a negative risk factor that should be considered when making a decision to start a 529 plan.
    Last edited by Melonie; 08-20-2013 at 02:06 PM.

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    Default Re: investing in childs future

    I have been thinking about opening a 529 plan for my twin boys (age 4) but they are both disabled. I want to look into f urther options because it is a possibility they will be unable to attend college and I would not want to pay penalties. I am just unsure what my options are as saving money for them can mess up future payments of disability should they need it. Yet I feel bad not to save something for them.
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    Default Re: investing in childs future

    ^^^ while the level of assets and resulting passive income won't have as much of a direct effect on social security disability payment eligibility, it could nonetheless affect eligibility for other social welfare benefits. Since you have no idea at this point in time how your 'disabled' children's situation will actually turn out 15 years down the road, putting money into anything that transfers 'ownership' to the children, or into a 529 plan, thus involves major future 'unknowns' that would appear to outweigh any benefits.

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    Default Re: investing in childs future

    Quote Originally Posted by Eric Stoner View Post
    This is an excellent area for discussion , ideas etc.. It was reported last week that the average cost of raising a child ( WITHOUT paying for college ) is now just under $250,000. That is from birth to age 18.
    It has gone up 2% since last year.

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    Default Re: investing in childs future

    Quote Originally Posted by Eric Stoner View Post
    This is an excellent area for discussion , ideas etc.. It was reported last week that the average cost of raising a child ( WITHOUT paying for college ) is now just under $250,000. That is from birth to age 18.
    I don't want to derail the thread but I can't help but wonder where on earth this figure comes from? How did they reach $250k?

    That's about $13,888 per year. There's no way I spend that much on raising one of my children yearly. That would mean with my 3 kids I'm spending $41,666 per year total on raising my kids? Adding one more to that soon would put me at $55,555 per year on raising 4 kids?! And that's not even counting child support and various other things we pay for my step daughter.

    If that was the case, I would definitely not be up to #4 by now! I'd be interested in reading the report and seeing where they are getting this.
    xoxo ~ Sarah




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    Default Re: investing in childs future

    The USDA just updated their calculations on the cost of raising a child ... from

    (snip)To raise a child born in 2013 to the age of 18, it will cost a middle-income couple just over $245,000, according to newly released estimates from the U.S. Department of Agriculture. That's up $4,260, or almost 2%, from the year before.

    Estimates can vary widely depending on where you live and how much you earn.

    High-income families who live in the urban Northeast, for example, are projected to spend nearly $455,000 to raise their child to the age of 18, while low-income rural families will spend much less, an estimated $145,500, according to the report.

    The figures are based on the cost of housing, food, transportation, clothing, health care, education, child care and miscellaneous expenses, like haircuts and cell phones. But the estimates don't include the cost of college -- a big-ticket expense that keeps rising.

    The good news: overall costs have grown more slowly in recent years thanks to low inflation, said economist Mark Lino, who has written the annual report for the USDA since 1987.

    But many families are still having to do more with less. The country's median income remains more than 8% below where it was before the recession, while child care and health care costs continue to grow faster than inflation.(snip)


    A major cost component is the cost of renting / owning a larger amount of 'space' ... to provide an extra bedroom for the child. This component is also the major contributor to regional cost variations.

    Another cost component is 'child care' expenses ... based on the assumption that the parent(s) work full time thus fees for day care, babysitters etc. cannot be avoided. Obviously, if out-of-pocket child care expenses aren't necessary in a particular situation, overall costs drop significantly.

    Fastest rising cost components are now the food and gasoline required to feed and 'transport' the child.

    Other news reports do point out that this number is based on ONE child. Once more children are involved, costs per child go down due to cost-saving measures like 'hand-me-down' clothing, toys etc. Also, associated housing costs also go down since parents of multiple children typically don't provide each child with their own bedroom.

    Also news reports point out that the published figures are averaged over the entire 18 years, while actual yearly costs are significantly lower during the child's younger years but rise rapidly as they enter the 'tween' and teenage years ... due to the resulting greatly increased food, clothing and transportation related costs. Higher housing costs may also kick in at this point for cases of multiple children who had previously been sharing rooms.

    The just released 2014 USDA report isn't online yet, but the 2013 USDA report can be found at
    Last edited by Melonie; 08-24-2014 at 06:59 AM.

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    Default Re: investing in childs future

    Quote Originally Posted by vixenluv View Post
    im due to have my daughter in a few weeks, and ive been looking into some type of long term investments that I can begin now. Im not the most financially savvy person, but i do read dollar den often and you guys are a huge help! From what Ive read on the internet it seems stocks would be a good way to go. However, Im a little intimidated by the stock world because like I said I dont know much about finance. Any advice on stocks or other long term investments that would be good to look into?
    Savings bonds are a good place to start for a new born. http://www.treasurydirect.gov/indiv/...nds_glance.htm
    You can buy one for as little as $25 and in 10 years cash it in to get $50 (depending on the type of bond, just an example). That return out paces CDs and the market of he past ten years.

    Another is a basic savings account. You can open it in your child's name and your name. You can drop money in it as you go. After you save up the amount you want to invest or put into a CD, you can move it over. Then when your child becomes older they can start to use the account.

    For the basics on investments I suggest Suze Orman. She has some really good books on the basics ie understanding terms, basic tax benefits, etc. Just make sure you find the newest book. Regulations, laws, and threshold amounts can change yearly.
    If you dont like taking risks with money, Dave Ramsay has books and a radio show about financial planning with little to no risk. He is focused on savings the old fashioned way.

    Congratulations on the bundle of joy~
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    Default Re: investing in childs future

    Quote Originally Posted by SarahTime View Post
    I don't want to derail the thread but I can't help but wonder where on earth this figure comes from? How did they reach $250k?

    That's about $13,888 per year. There's no way I spend that much on raising one of my children yearly. That would mean with my 3 kids I'm spending $41,666 per year total on raising my kids? Adding one more to that soon would put me at $55,555 per year on raising 4 kids?! And that's not even counting child support and various other things we pay for my step daughter.

    If that was the case, I would definitely not be up to #4 by now! I'd be interested in reading the report and seeing where they are getting this.
    I don't have kids, but I grew up along side my older sister who has 11 kids (she's religious). She never worked, but her husband (the father of all 11) has, and I don't think she was ever in a life-of-death-no-food situation. They just had a lot of home-cooked meals, thrifting, clothing donations from their church/friends who outgrew their clothing, inexpensive vacations like camping trips and outdoor activities. There is no way in hell she spent $152,778 per YEAR (250,000/18= 13,889x11=152,778/yr) just on paying for her kid's expenses. I'm pretty sure her husband doesn't even make that much per year. I don't even think she spent half that much on her kids each year. And the children were never deprived, sacrificed things, or went "without"... so I don't know how that figure can even be remotely accurate. And this was/is in the Bay Area where its not exactly cheap.

    I would imagine you can also re-use the same items for the younger ones? Or get stuff from your friends whose kids have outgrown them (toys, furniture, clothes, etc). Also, thrift stores? I would imagine that, if someone wanted to, they could get a lot of the items they need for free or very low cost. The thing is, a lot of people don't like to do that because they don't like the stigma of something "used" for some dumb reason.

    So I would imagine the 250k could greatly be decreased by around half or something, if you really wanted that figure to be lower? And I don't really think 125k is a lot, spread over 18 years. A sexworker could make that in 1 year, if they really wanted.

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    Default Re: investing in childs future

    Quote Originally Posted by GlamourRouge View Post
    I don't have kids, but I grew up along side my older sister who has 11 kids (she's religious). She never worked, but her husband (the father of all 11) has, and I don't think she was ever in a life-of-death-no-food situation. They just had a lot of home-cooked meals, thrifting, clothing donations from their church/friends who outgrew their clothing, inexpensive vacations like camping trips and outdoor activities. There is no way in hell she spent $152,778 per YEAR (250,000/18= 13,889x11=152,778/yr) just on paying for her kid's expenses. I'm pretty sure her husband doesn't even make that much per year. I don't even think she spent half that much on her kids each year. And the children were never deprived, sacrificed things, or went "without"... so I don't know how that figure can even be remotely accurate. And this was/is in the Bay Area where its not exactly cheap.

    I would imagine you can also re-use the same items for the younger ones? Or get stuff from your friends whose kids have outgrown them (toys, furniture, clothes, etc). Also, thrift stores? I would imagine that, if someone wanted to, they could get a lot of the items they need for free or very low cost. The thing is, a lot of people don't like to do that because they don't like the stigma of something "used" for some dumb reason.

    So I would imagine the 250k could greatly be decreased by around half or something, if you really wanted that figure to be lower? And I don't really think 125k is a lot, spread over 18 years. A sexworker could make that in 1 year, if they really wanted.
    Truth be told, I'm a little skeptical as well. Now they may be projecting this in future dollars and factoring in inflation, but even still. I have 3 children and there are definitely economies of scale that are achieved, on a per child basis, when you have more than one. Cribs, clothing, child safety equipment and toys are re-used, food and other goods are purchased at bulk prices, there is more sharing of common household space, they are all transported together in many instances, many health insurance plans are priced on a family basis, etc. We even receive per head discounts for having our kids attend the same academic and performing arts schools.

    Now I'm not saying that we don't spend a lot of money on our children, but we are fortunate enough to be able to do so and a lot of that is by choice. If we cut out things like private schools and expensive kids-oriented vacations, among other discretionary spending on them, and did other things to live more frugally, then I'm sure we could house, feed, clothe and otherwise care for them for far less than $40,833 (250,000/18 x3) per year over and above what we already need to spend to support ourselves.

    The median household income for families with children was $60,500 in 2012, and many of those families have more than one child and significant base living expenses (housing, transportation, food, healthcare, etc.) that would exist even if they had none. So many families are raising kids on far less additional spending than this study suggests is needed.
    Last edited by rickdugan; 08-24-2014 at 06:26 PM.

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    Default Re: investing in childs future

    Again, the question needs to be asked and answered up front regarding whether the parent will retain 'ownership' of those savings and investments, or whether official 'ownership' will immediately be placed in the child's name. This is particularly important in the case of a child who is likely to have disabilities ( as was mentioned earlier in this thread ), where every dollar of savings and investment earnings that occurs in the name of a 'disabled' child can potentially result in a dollar being lost from their future SSI disability checks !

    But it is also of some importance in all cases, since retained official 'ownership' by the parent versus assigning official 'ownership' to the child, has different tax consequences, different consequences based on the child's potential decisions once they reach age 18 / 21, different consequences if the parent should ever face bankruptcy filing, different consequences should the parent ever face a need for quick cash / collateral, etc.

    With the exception of money placed into a '529 plan' ... which arguably falls in the same category as money placed in a 401k / IRA in terms of being 'exempt' from bankruptcy / collection proceedings against the parent ... any type of savings or investment which officially remains under the parent's name is still legally considered to be the parent's asset. This would include joint bank accounts, joint investment accounts etc. with the child. Thus, prior to the child reaching age 18 / 21 and the parent officially transferring ownership, dividends and interest earned on this money is taxable income to the parent. This money is also potentially vulnerable to collection efforts against the parent by creditors as well as the IRS.

    And again with the exception of money placed into a '529 plan', any type of savings or investment which is officially placed in the child's name ( a.k.a. 'custodial accounts', UGMA accounts etc. ) counts as a 'gift' made by the parent. Thus dividends and interest earned on this money is taxable income to the child. The money is immune from collection efforts against the parent. But the money is legally owned by the child, meaning that when the child reaches age 18 / 21 they can do whatever they choose with 'their' money regardless of how the parent feels about the child's choices.

    As is also the case with 401K's and IRA's, '529 plans' offer some unique advantages ... but also offer some unknown potential risks.
    Last edited by Melonie; 08-25-2014 at 08:22 AM.

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    Default Re: investing in childs future

    For the skeptics - the number is a national average. As Melonie has pointed out it is based on raising one child up to age 18. Additional children are "cheaper ' because of economies of scale , redundant housing costs , hand-me- downs etc.

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