Vanguard Target 2060 Fund for car????

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upsdriver
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Vanguard Target 2060 Fund for car????

Post by upsdriver » Tue Oct 22, 2013 10:12 am

Hello. Looking for advice for short term savings toward a car. My daughter is just about to turn 12, and when she get her license at 16 we will bringing a new car into the fray. Rather than have her buy a beater that I cant fix, I have decided to buy a third car to add to the fleet. I have about $1500 currently, and plan to add $300 a month until she nears 16. Naturally, looking for a low cost fund and something that has a $1000 minimum. Id much rather invest in equities than bonds. If the account doesn't do so well, the car just wont be as nice. Looking at the Vanguard Target 2060 fund, it gives me 90% equities, low cost fees, and a $1000 minimum. Ive looked into ETFs to avoid the minimum, but would rather have the money automatically applied to the fund each month for simplicity. Does this seem like a good option for my short term goal? Is there anything else out there that I should consider rather than this idea? Thanks for reading and I love the forum.

supersharpie
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Re: Vanguard Target 2060 Fund for car????

Post by supersharpie » Tue Oct 22, 2013 10:15 am

If you simply stick the money in a checking account you will have about $15,000 in inflation adjusted dollars by the time your daughter turns 16. That is enough to buy her a basic new car or a very nice, lightly used Honda Civic or Toyota Corolla. Why risk the money in the market?

upsdriver
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Re: Vanguard Target 2060 Fund for car????

Post by upsdriver » Tue Oct 22, 2013 10:26 am

That is a good point. I should also add that we live totally debt free(except for our mortgage of course, 13 yrs to go). I plan on using that "account" as a fund to purchase new cars as needed. I guess with something like automobiles, I dont mind taking some risk.

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cflannagan
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Re: Vanguard Target 2060 Fund for car????

Post by cflannagan » Tue Oct 22, 2013 10:27 am

For 4 years horizon I would look into interest-bearing saving/checking accounts, and CDs.

upsdriver
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Re: Vanguard Target 2060 Fund for car????

Post by upsdriver » Tue Oct 22, 2013 10:36 am

I need to clarify. I will need the money in 4 years to purchase the first car. I plan to keep adding to this fund and using it down the road when it comes time to replace vehicles and move into nicer vehicles.

Luke Duke
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Re: Vanguard Target 2060 Fund for car????

Post by Luke Duke » Tue Oct 22, 2013 10:47 am

If you're willing to accept the risk that you might only have half the money when you need it, then go for it.

Twins Fan
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Re: Vanguard Target 2060 Fund for car????

Post by Twins Fan » Tue Oct 22, 2013 11:23 am

So, you want to SAVE for a car?... Clue coming at you. :D

I think most here would say to set up a separate "vehicle" savings account for your plans. But, you're free to do as you please.

bungalow10
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Re: Vanguard Target 2060 Fund for car????

Post by bungalow10 » Tue Oct 22, 2013 11:43 am

upsdriver wrote:I need to clarify. I will need the money in 4 years to purchase the first car. I plan to keep adding to this fund and using it down the road when it comes time to replace vehicles and move into nicer vehicles.


If the value of the account is down (say you contribute $15,000 and it's only worth $9k because of market conditions when your daughter turns 16), are you going to withdraw all the money to buy a car? Or will you tell your daughter she can't have a car until the market recovers?
An elephant for a dime is only a good deal if you need an elephant and have a dime.

donaldfair71
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Re: Vanguard Target 2060 Fund for car????

Post by donaldfair71 » Tue Oct 22, 2013 11:59 am

upsdriver wrote:Hello. Looking for advice for short term savings toward a car. My daughter is just about to turn 12, and when she get her license at 16 we will bringing a new car into the fray. Rather than have her buy a beater that I cant fix, I have decided to buy a third car to add to the fleet. I have about $1500 currently, and plan to add $300 a month until she nears 16. Naturally, looking for a low cost fund and something that has a $1000 minimum. Id much rather invest in equities than bonds. If the account doesn't do so well, the car just wont be as nice. Looking at the Vanguard Target 2060 fund, it gives me 90% equities, low cost fees, and a $1000 minimum. Ive looked into ETFs to avoid the minimum, but would rather have the money automatically applied to the fund each month for simplicity. Does this seem like a good option for my short term goal? Is there anything else out there that I should consider rather than this idea? Thanks for reading and I love the forum.


Seems to me that CDs, High Yield Online Savings, and I-Bonds would fit the bill here.

Personally, I would go the I Bond route until she is 15 (or she is approximately 1 year out from buying). Then go with standard savings for that year. This is what I have done (and continue to do) for car savings. Principal is well-protected, and it can be automated for contributions.

Quickfoot
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Re: Vanguard Target 2060 Fund for car????

Post by Quickfoot » Tue Oct 22, 2013 12:10 pm

Short term savings and stocks are mutually exclusive. For someone 4-6 years away you really are going to be looking at savings rate instead of return. At 90% equity if stocks took a dive your daughter might only have 50-60% of her money at the time she needs to buy a car. A short term bond index fund would be as aggressive as I would go in your time frame, 3-5 year CD's a probably a better bet.

For longer term savings I have my 6 year old's money in a 2030 target date ETF from ishares, no minimum but you do pay transaction fees so I do it in $500 to $1000 increments. She gets $20 monthly allowance, I met with her and she chose how much of her money she wanted to spend, save, and invest (she has to allocate a portion to all three). We pay 10% interest on money she saves, and we match 50% for money she invests.

The Wizard
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Re: Vanguard Target 2060 Fund for car????

Post by The Wizard » Tue Oct 22, 2013 12:22 pm

To the OP, it depends on what other after-tax resources you have.
Also, I'm not a big fan of focusing a particular investment vehicle (pun?) on a specific purchase like that.
I think the others are right: a savings acct is probably the better way to get this job done...
Attempted new signature...

Dave76
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Re: Vanguard Target 2060 Fund for car????

Post by Dave76 » Tue Oct 22, 2013 12:30 pm

A new/late model car for a 16 year old? :oops: Why does a 16 year old even need a car? You're throwing your money away.

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Epsilon Delta
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Re: Vanguard Target 2060 Fund for car????

Post by Epsilon Delta » Tue Oct 22, 2013 1:27 pm

I'd just throw the money into my taxable investments and make a note that I had an expense in 4 years and adjust liquidity a tad as appropriate. I might keep a private tally sheet showing the notional value allocated to the car. In reality the car would be purchased mainly out of cash flow during the year of purchase (of course this would reduce my savings during that year).

Do you usually set up separate accounts for particular expenses? Do you intend this account to be educational for your daughter?

YDNAL
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Re: Vanguard Target 2060 Fund for car????

Post by YDNAL » Tue Oct 22, 2013 2:28 pm

upsdriver wrote:Hello. Looking for advice for short term savings toward a car. My daughter is just about to turn 12, and when she get her license at 16 we will bringing a new car into the fray. Rather than have her buy a beater that I cant fix, I have decided to buy a third car to add to the fleet. I have about $1500 currently, and plan to add $300 a month until she nears 16.

$300 x 48 = $14,400 + $1,500 + a little growth and you are (she is) good to go.

Why 90% Stocks ?... that doesn't make sense. In exactly 3 years 9 months, after consulting my crystal ball I can predict a 60% drop in Stocks, so your savings in TR 2060 would be worth about $7 grand. :(
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