[bjacobs]

Hey guys I am just looking for a little advice here on what everyone else has done with their kids' money as an alternative to letting it just sit in a bank account making minimal interest.
My children are 1, 3, and 6 and all have a decent amount of money from birthdays, holidays, baptisms, etc that is currently just sitting in their accounts at our credit union. My wife and I are considering different options on what to do with the money because they won't need it for a considerable amount of time. We have considered CDs, but it appears that their rates are right around the rate of inflation, but it is a safe bet. We have also discussed just putting it into their 529s and investing it into the S&P or some other low cost investment.

Just wondering if there is some other preferred investment vehicle I am overlooking. I know this isn't a "one size fits all" situation but any input (good or bad) would be helpful. Thanks.

 

[usedtobeayooper]

My daughters are 3 and 7. My wife and I started 529's through misaves.com (Michigan Education Savings Plan - MESP) when they were each born and have steadily donated about $200/month per kid. Still won't likely be enough to cover college, but it'll put a big dent in it.

As for their own gift money, etc., that sits in a savings account with their names on it... but it's peanuts... maybe a couple hundred bucks.... if it was more, I may consider adding it to the account. In fact, I really wish the grannies and grandpa's would start leaning that way instead, because my garage is about as full of one time use big plastic toys as I care to store.

 

[Dantana]

I started a 529 for my one year old last year. Financial advisor said we would have to put $5700 per year if we want send him to UM. Maybe we will settle for community college! :lol:

 

[sureshot006]

I started a 529 for my one year old last year. Financial advisor said we would have to put $5700 per year if we want send him to UM. Maybe we will settle for community college

There is no law saying you must pay their way through college. He or she should be grateful to get say, 2 years paid for.

 

[ohio hunter]

My first post in this forum. I have been reading the posts in this group over the past week and really enjoy it.

We put our kids' gift money into mutual funds (non qualified) when they were young (maybe 5 and 8 years old). They are now 18 and 21. They also have some CD's but the rates are horrible so the bulk of their money is in their mutual funds accounts.


We also started 529 plans for both of them but didn't contribute consistently. It was probably for the better because our oldest didn't go to college and our youngest is looking a a 2 year degree when he graduates high school in the spring. Our youngest has almost enough to cover his tuition. We may change the beneficiary on our oldest son's 529 so we can use it for our youngest son's housing. We are trying to coordinate the use of 529 plans, scholarships and some non 529 money to maximize the American Opportunity tax credit and not get hit to hard with penalties if we don't use all the 529 money for education. Our plan is to give our oldest son cash equal to what his 529 plan amounts to so as to keep things equal between the two.

We also have our 21 year old maxing out his Roth IRA contributions the past two years.

 

[Luv2hunteup]

There is no law saying you must pay their way through college. He or she should be grateful to get say, 2 years paid for.

More than likely your kids will be the beneficiary of your net worth upon your death. Why not give them some of it early in the form of a college education without saddling them with debt? It will jump start their ability to build wealth. Finding a job with a defined pension program plus 401k is getting more difficult. It’s quite possible that their SSI payments will be 80% of yours. By gifting them an education also allows you to enjoy the money you earned instead of wondering what will happen to it while on your death bed.

 

[Far Beyond Driven]

Question on the 529's - my daugther is looking at two colleges with free ride on tuition, but not room and board.

Can the 529 cover room and board?

Can the 529 cover room not through the school, i.e. off campus apartment?

And if it's my daugther asking, can the 529 cover her own trailer in the trailer court that she can then sublet to others to make more than her rent, leaving money for a snowmobile and wine?

 

[Gamekeeper]

More than likely your kids will be the beneficiary of your net worth upon your death. Why not give them some of it early in the form of a college education without saddling them with debt? It will jump start their ability to build wealth. Finding a job with a defined pension program plus 401k is getting more difficult. It’s quite possible that their SSI payments will be 80% of yours. By gifting them an education also allows you to enjoy the money you earned instead of wondering what will happen to it while on your death bed.

I couldn’t like this post times 10, so I thought I would comment.

Children only know what they know.
They are a blank slate, Just accepting whatever is around them.
How ever they turn out is the product of their environment and life experience.

Education has a huge impact on that, and can be made use of from cradle to grave.

In hindsight, instead of letting my kids determine the destiny of whatever funds they received as gifts and what not, we should have done the same thing with the kids that the wife and I do for ourselves.

That is, spend a little, and invest a little,.
Creating little consumers, if you think about it, entrenches bad habits, and prevents the kid from taking advantage of 20 years of compounding investment value.
It’s a great habit for a youngster to be exposed to, It teaches them the connection between Hardwork, investment, and outcome.

So, if I had kids that we’re getting birthday money etc., I would help them open up an in vestment account, and let them spend some of it.

And I would begin toAdd some of my own money to their deposits to show them how an employer can throw in matching funds.

As the account balance grows, they’ll understand how things really work.

 

[TNL]

Question on the 529's - my daugther is looking at two colleges with free ride on tuition, but not room and board.

Can the 529 cover room and board?

Can the 529 cover room not through the school, i.e. off campus apartment?

And if it's my daugther asking, can the 529 cover her own trailer in the trailer court that she can then sublet to others to make more than her rent, leaving money for a snowmobile and wine?

"Room & board costs are considered qualified only during the academic period in which the student is enrolled or accepted for enrollment in a program that leads to a recognized educational credential from an eligible educational institution. This amount cannot exceed the institution’s ‘cost of attendance’ allowance.

Funds can be used at most accredited colleges and universities in the United States — even certain colleges abroad."

This is from the 529 website. I don't think they can deny off-campus housing as long as it's within the college's housing allowance. Meaning you can't rent the Vanderbilt Mansion for college room and board.

Those with young kids I would seriously take a look at the 529 MET program where college tuition is locked in at today's prices. 529 offers the most flexibility and the Michigan 529, in particular, is highly ranked among them. If you're kid doesn't go to college/trade schools, etc., no big deal.

My son has done very well in school taking classes with strong academic rigor. Top 1% out of 400 kids. He's in his senior year and he receives at least 2 to 3 pieces of college marketing each day. Like FBD's daughter, he's been offered full ride on tuition just about everywhere he's applied. A few are starting to up the ante. We'll see.

Choose wisely. These kids are going to be picking out your nursing home.

 

[Luv2hunteup]

5 years ago I moved from the second home I purchased after graduating from MTU. I lived there for ~30 years so we had collected and stored lots of junk. While sorting and packing for the move I found my tuition receipts from ‘75-‘76. To graduate on time I had to load up on credits. Senior mechanical engineering classes over lapped which made it possible to take a heavy credit load. I took 21, 22 and 23 credits during that school year. Total tuition cost was $215 per quarter or $645 for 66 credits. My how things have changed. BTW job offers were well under $1,000/month.

 

[usedtobeayooper]

Choose wisely. These kids are going to be picking out your nursing home.

That's why I had daughters instead of sons.....

 

[Far Beyond Driven]

" and he receives at least 2 to 3 pieces of college marketing each day."

Crap, I thought that was just slowing down. Mine's a year behind you.


"Choose wisely. These kids are going to be picking out your nursing home. "

Mine keeps threatening that someday she may hold my heart in her hand. I'm not sure she means during by-pass surgery, or the "Kaliman" scene in Indiana Jones, and I'm not going to ask.

 

[sureshot006]

More than likely your kids will be the beneficiary of your net worth upon your death. Why not give them some of it early in the form of a college education without saddling them with debt? It will jump start their ability to build wealth. Finding a job with a defined pension program plus 401k is getting more difficult. It’s quite possible that their SSI payments will be 80% of yours. By gifting them an education also allows you to enjoy the money you earned instead of wondering what will happen to it while on your death bed.

This isnt about me, but a person that may not have the ability to do what you suggest. It is not the responsibility of a parent to pay for the education of a child. If they cant do it, oh well.

For what it's worth, my trust holds any money my son would get until after college and he should already be well established on his own. Also funding a 529 which "should" be adequate for in state tuition.

 

[DirtySteve]

Hey guys I am just looking for a little advice here on what everyone else has done with their kids' money as an alternative to letting it just sit in a bank account making minimal interest.
My children are 1, 3, and 6 and all have a decent amount of money from birthdays, holidays, baptisms, etc that is currently just sitting in their accounts at our credit union. My wife and I are considering different options on what to do with the money because they won't need it for a considerable amount of time. We have considered CDs, but it appears that their rates are right around the rate of inflation, but it is a safe bet. We have also discussed just putting it into their 529s and investing it into the S&P or some other low cost investment.

Just wondering if there is some other preferred investment vehicle I am overlooking. I know this isn't a "one size fits all" situation but any input (good or bad) would be helpful. Thanks.

I have a story for you.....

My kids are now 21 and 22 but they had around 500-600 when they were 3-4 yrs old. Thisnwas their money from bdays xmas etc just as you describe. I bought some mutual fund shares from american funds. I bought them in an account that had myself as joint account holder until they turned 18 then it became theirs. You could add yearly and buy more shares as they recieved gift money. We told them about it the account on their 18th bday.

My oldest sons account showed that we had purchased $660 worth of shares throughout his life. At 18yrs of age his accound was worth $2300. My daughters account showed we bought $550 in shares and her amount at 18yrs old was $2100.

Both kids were so amazed at the growth they decided not to cash in and let it ride. That kind of surprised me. We pulled up their accounts at christmas when they were home from college. My sons account was at $3k. My daughters was at $2800.

At the time I bought there was an option for A shares and B shares. One charges a fee when they cash out the other charges a larger up front fee when you initially buy. I paid the upfront fee.....usually a better deal if you are holding longterm. The fund i bought them was washington mutual investers fund. Pretty sure you could do this with any invesment firm out there.

They do have to pay taxes on the interest the same as a buying a savings bond etc...

 

[November Sunrise]

This isnt about me, but a person that may not have the ability to do what you suggest. It is not the responsibility of a parent to pay for the education of a child. If they cant do it, oh well.

I don't perceive there to be a one size fits all answer in terms of where the parental financial responsibility lines "should" be drawn. Plans and philosophies when a child is young often collide with reality when a child enters college, as there is a long list of things that will have to be sorted out in terms of who is responsible for what.

 

[November Sunrise]

For what it's worth, my trust holds any money my son would get until after college and he should already be well established on his own. Also funding a 529 which "should" be adequate for in state tuition.

Do you have it set up where the executor of the trust is able to meet the financial needs of your son through the years until the remaining money all becomes his at whatever age you've designated?

 

[sureshot006]

Do you have it set up where the executor of the trust is able to meet the financial needs of your son through the years until the remaining money all becomes his at whatever age you've designated?

Yes we did allow for expenses while he lives with his guardians.

 

[November Sunrise]

Yes we did allow for expenses while he lives with his guardians.

That's important. Estate attorneys almost always also recommend that the individuals who control the dollars of the estate are different than the individuals who raise the child as guardians. There are lots of reasons why that is preferable as compared to the guardians being the only ones who determine how dollars are spent.

Once the child reaches adulthood and is no longer living with guardians it's important that whoever distributes the dollars continues to have the ability to provide for financial needs until the child reaches the age where the dollars become his to manage.

 

[sureshot006]

That's important. Estate attorneys almost always also recommend that the individuals who control the dollars of the estate are different than the individuals who raise the child as guardians. There are lots of reasons why that is preferable as compared to the guardians being the only ones who determine how dollars are spent.

Once the child reaches adulthood and is no longer living with guardians it's important that whoever distributes the dollars continues to have the ability to provide for financial needs until the child reaches the age where the dollars become his to manage.

Yup the guy managing the Trust is a good friend who I completely trust to "do the right thing." Alternatives were considered but all had a history of... questionable decisions.

 

[Groundsize]

More than likely your kids will be the beneficiary of your net worth upon your death. Why not give them some of it early in the form of a college education without saddling them with debt? It will jump start their ability to build wealth. Finding a job with a defined pension program plus 401k is getting more difficult. It’s quite possible that their SSI payments will be 80% of yours. By gifting them an education also allows you to enjoy the money you earned instead of wondering what will happen to it while on your death bed.

I don't have kids. I'm 39 next month. I would put the cash every so often as a choose into an S&P 500 index funds or ETF funds and enjoy the ride. They are only going up. That being said,

On to Luv2hunteups post.
Why give your kids everything? My dad flat out told me he didn't have the money for my schooling. He was a steel worker. Taught me to be responsible for others and but also myself and not expect hand outs.. I started a business and paid every August for tuition. I worked hard. Became very responsible and successful doing so. Was never looking for a hand out or be walked through life. Just my thoughts. That being said. I would offer to help out my kids a little but not give them everything.