We want to get our daughter a head start in life and build up some savings for her to use in the future (whether she uses this for college or a down payment on a home.) We aren't really excited about putting money away in a 529K because she may not want/need to go to college. Could you give us some recommendations for the best way to save and grow money for her? She will be turning 2 in April.

When she receives money for b-day, Christmas etc. we plan to take at least 50%-75% and put into her savings. I wish I could get back a lot of the money I pissed away when I was a kid.

Stocks, bonds, gold, silver other investments?

Thanks guys.

How about a Roth IRA?

Special First-Time Homebuyer Clause

Roth IRA rules state that a first time homebuyer can withdraw funds from a Roth IRA under the following conditions:

The account has been open for five years.
You withdraw $10,000 or less to purchase a home.
The funds are used directly toward home acquisition (down payment, closing costs, etc.).

If the above criteria are met you can withdraw every last cent of your Roth IRA, up to $10,000, from the account. The $10,000 limit is a lifetime limit, by the way. If the rules are met, the withdrawal will count as a qualified distribution and you will avoid paying income tax and early withdrawal fees.

https://www.rothira.com/blog/s...-roth-to-buy-a-house

I used some of my Roth IRA money to help with my first home purchase back in 2001. The $10k limit seemed so much bigger then!

UGMA account gives the most flexibility but has no tax favored status and can affect student loans and grants.

I'm going to veer completely away from all the investment answers (which probably really are your best options)

For my 2 nephews I've created a photo album for each. Every birthday and Christmas or when we take trips together (camping, shooting etc) I take a photo from that day and stick it in the album. I also put a silver eagle from that year in the same slot. They don't know about the albums. Not exactly sure when they will get them. Probably when they get married or buy a their first house or something.

They may elect to not spend the money but keep it instead. Or, they may dump the album and pictures, cash in the silver and say"uncle who"?

I started this 10 years ago when the first was born as something a little different that I hope will be a nice story some day.

Mark

I thought you could only invest in a Roth if you had an income, how can we put her money (the money she receives from gifts) into Roth IRA?

"Children must have earned income in order to have a Roth IRA in their names." thats from the IRA for kids link above. I think IRAs are out?

Yeah, pretty sure you have to have earned income (she would) in order to fund any IRA in her name.
I'd set her up with an account at one of the big houses like Fidelity.
Put the money in SPY,DIA or QQQ. When she gets old enough to earn some money you could then move that amount over into a Roth at her current tax rate. In other words for next to nothing.

quote:

Originally posted by David W:
I thought you could only invest in a Roth if you had an income, how can we put her money (the money she receives from gifts) into Roth IRA?

"Children must have earned income in order to have a Roth IRA in their names." thats from the IRA for kids link above. I think IRAs are out?

Correct a mundo!!

If you want to give her a real head start, involve her in the savings process. I know two year old may be too young but as soon as she can figure it out, involve her.

It doesn't really matter (to me) what the savings vehicle that you choose, let's make it two piggy banks for now, one big and one small.

Every time she gets some money, teach her to set aside some money like 10% in the the small piggy bank and an equal amount in the big piggy bank. The small piggy bank is for short term savings goals like a bike, a toy, a car. The bigger piggy bank is for her to save enough money so that she's not going to have to work anymore and she could do whatever she wants with her life.

As the money gets big enough, the long term savings will definitely do well in a low cost total stock market ETF fund.

If you get these two separate savings account ingrained as part of her thinkingand get her to set aside for both with every dollar that comes in, you would have set her up for life financially.

Another recommendation for the Roth.

Do you know about DRIPs?

Choose a good company that pays quarterly dividends, get one share of the company in your daughter's name, and open a DRIP with it. Salt away $50 or $100 in it every month. The quarterly dividends will automatically be converted into shares. By the time she's an adult there ought to be enough there to pay for college.

When our kids(2) were very young I started with a 529 savings plan and a UGTM account with Vanguard. If interested in a 529 plan check specifics with tax deductibility and what plan is best(saving for college.com) I ended up with a ‘self managed’ WI plan, with access to Vanguard funds, and others.

There were no real fees besides a small management %, with a State deduction averaging $3k per child. The older graduates college in May, his 529 is drained, zero in educational loans.

One normally needs earned income for any type if IRA. Once they get some type of job as a teen, that’s the time to steer them to the Roth.

The UGTM acct is really just a way to get an account in their name. Since I was paying for most of college, priority with the account was modest.

Say you put $$ in a 529 and it ends up not needed, you can get it out, just have to pay tax on earnings. One can also transfer it to another fairly easily.

Put it in the 529.
If they don't use it then you can transfer it to them and they pay the taxes and penalty, change beneficiary to grandchildren or use it yourself and take some classes.
Why would you save it all those years and give your kid an out from advancing their education somehow? You don't have to cash it out at 18.

quote:

Originally posted by 220-9er:
Put it in the 529.

Why would you save it all those years and give your kid an out from advancing their education somehow? You don't have to cash it out at 18.

Totally agree.

They will 99.9% need some form of post-secondary training - even if it's 'just' junior college or community college.

Plus the message is - use the money to improve yourself for the future vs. blow it on material wants / needs.

Good luck -

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We have a 529 for you the boys. One is 4, the other 11. It’s up to $90k. Hopefully we can get it to $200k by the Time the first is in college. It will accumulate and compound if you start now. Feed the pig every chance you get.

quote:

Originally posted by smithnsig:
We have a 529 for you the boys. One is 4, the other 11. It’s up to $90k. Hopefully we can get it to $200k by the Time the first is in college. It will accumulate and compound if you start now. Feed the pig every chance you get.

that's super

it's nice to have $$$ on-hand when they start college so you aren't run over by the sudden onslaught of major education expenses

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