Low Minimum Investment Account For Young Kids

[bmelikia]

I'd like to get "starter" investment account going for my young boys (Ages 8 months and almost 3).

I don't want these to be 529 accounts.

1) Where is a good place to open a "starter" investment account for them? (Low minimums - $100 or less). Most of our investment money is at Vanguard so if that's an option I honestly would just put a couple hundred dollars into each of the boys accounts just to get things going.

2) What type of taxable account would be best for them? (UTMA, UGMA, something else?)

[brad.clarkston]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

[bmelikia]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

K - I'm not going to put "this" money into a 529 - that was the second line of my post. . .thanks for trying

[dru808]

I recommend you open a 529. kidding

How about just sticking with vanguard and buying splg, sptm, schk, low priced ETFs?

[brad.clarkston]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

K - I'm not going to put "this" money into a 529 - that was the second line of my post. . .thanks for trying

And you totally missed the point but I expected that.

[MarkRoulo]

I'd like to get "starter" investment account going for my young boys (Ages 8 months and almost 3).

I don't want these to be 529 accounts.

1) Where is a good place to open a "starter" investment account for them? (Low minimums - $100 or less). Most of our investment money is at Vanguard so if that's an option I honestly would just put a couple hundred dollars into each of the boys accounts just to get things going.

2) What type of taxable account would be best for them? (UTMA, UGMA, something else?)

I did this 20 years ago for my newborn son. Schwab had no minimums (or maybe very low minimums?).

I don't know what "sort" of account it was. The same sort of account that I opened at the local credit union for him at about the same time. When he turned 18 he had full access to the money (it WAS his money ...).

It does appear that Schwab still allows no-minimum accounts, so I'd consider going with that.

[Marengo]

IIRC, Vanguard does not charge an annual fee if you sign up for paperless statements and the minimum is the price of one share of an ETF. ESGV trades for around $72. Vanguard offers UGMA accounts.

[MishkaWorries]

I'd like to get "starter" investment account going for my young boys (Ages 8 months and almost 3).

I don't want these to be 529 accounts.

1) Where is a good place to open a "starter" investment account for them? (Low minimums - $100 or less). Most of our investment money is at Vanguard so if that's an option I honestly would just put a couple hundred dollars into each of the boys accounts just to get things going.

2) What type of taxable account would be best for them? (UTMA, UGMA, something else?)

I did this 20 years ago for my newborn son. Schwab had no minimums (or maybe very low minimums?).

I don't know what "sort" of account it was. The same sort of account that I opened at the local credit union for him at about the same time. When he turned 18 he had full access to the money (it WAS his money ...).

It does appear that Schwab still allows no-minimum accounts, so I'd consider going with that.

I know the minimum for a Schwab mutual fund is $1.00. I learned that today when I had a $12.47 balance in my IRA account and it was bugging me. One aspect of ETFs that annoy me. I looked and the minimum amount to buy Schwab's whole market fund was $1.00. now all my money is working.

[ChrisBenn]

Just open up a taxable account and earmark that. There really isn't a point to a UTMA if you are both the guardian and the person contributing the money - it really only cuts down on your future options without giving you anything in return.

If you prefer mutual funds then I would go vanguard for the better tax efficiency (but with the 1k+ minimums they might be ruled out by your criteria); You might consider fidelity for fractional share support, or m1 for fractional shares and fully automated investing.

[bmelikia]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

K - I'm not going to put "this" money into a 529 - that was the second line of my post. . .thanks for trying

And you totally missed the point but I expected that.

Brad - your point is not relevant - and therefore not actionable - when I specifically state what I am NOT going to do in the second line of my post. . .you “missed” it. . .

You must assume that I don’t already have 529 accounts established and funded for my kids. . .that box has been checked. . .did you expect that? It appears not. . .

[bmelikia]

Just open up a taxable account and earmark that. There really isn't a point to a UTMA if you are both the guardian and the person contributing the money - it really only cuts down on your future options without giving you anything in return.

If you prefer mutual funds then I would go vanguard for the better tax efficiency (but with the 1k+ minimums they might be ruled out by your criteria); You might consider fidelity for fractional share support, or m1 for fractional shares and fully automated investing.

Thank you Chris

[bmelikia]

I'd like to get "starter" investment account going for my young boys (Ages 8 months and almost 3).

I don't want these to be 529 accounts.

1) Where is a good place to open a "starter" investment account for them? (Low minimums - $100 or less). Most of our investment money is at Vanguard so if that's an option I honestly would just put a couple hundred dollars into each of the boys accounts just to get things going.

2) What type of taxable account would be best for them? (UTMA, UGMA, something else?)

I did this 20 years ago for my newborn son. Schwab had no minimums (or maybe very low minimums?).

I don't know what "sort" of account it was. The same sort of account that I opened at the local credit union for him at about the same time. When he turned 18 he had full access to the money (it WAS his money ...).

It does appear that Schwab still allows no-minimum accounts, so I'd consider going with that.

I know the minimum for a Schwab mutual fund is $1.00. I learned that today when I had a $12.47 balance in my IRA account and it was bugging me. One aspect of ETFs that annoy me. I looked and the minimum amount to buy Schwab's whole market fund was $1.00. now all my money is working.

Thank you for the help

[Metsfan91]

1) Where is a good place to open a "starter" investment account for them? (Low minimums - $100 or less). Most of our investment money is at Vanguard so if that's an option I honestly would just put a couple hundred dollars into each of the boys accounts just to get things going.

Fidelity offers No Minimum mutual funds.

2) What type of taxable account would be best for them? (UTMA, UGMA, something else?)

Mr. Paul Merriman recommends, I hope I understood him correctly, opening taxable accounts for children. Once they start earning, then convert the fund to Roth. Here is the link for more info: https://paulmerriman.com/turn-3000-into-50-million/

Mr. Merriman talks about starting with 3,000. However, I see no reason why one could not start with smaller amount.

-Metsfan91

[manatee2005]

Robin Hood

[mcfrosty]

If you don’t mind paying a monthly fee, you could use something like Greenlight. There is a fee free investing component. You would get access to chore and allowance management (obviously not a factor now with the age of your children).

For something with no monthly fee and no trading fees, Robinhood would be a good option.

[drumboy256]

Fidelity UTMA accounts with VT.

Easy peazy.

[lakpr]

What is the total amount you wish to invest at this time? And are you firm in investing that in the market, or are you open to suggestions for investment in fixed income?

DCU (Digital Federal Credit Union) offers 6% interest on balances up to $1000. It requires $15 donation to a charity to become a member (for the adult, not the minor), then you can open UTMA savings account for the minor. I have invested exactly $1000 for my kids here in UTMA accounts.

Next question I want to ask is if you work in the financial industry. I do. The reason I mention it is because, as condition of employment, we are required to allow the compliance office access to transactions made in brokerage accounts of immediate family members. That includes minor children and UTMA accounts too.

I avoided the problem so far because we (both my wife and I) are locked into mutual fund platform at Vanguard, and mutual fund platforms are exempt. But now that option is closed at Vanguard, and I am not sure if there is any firm that offers investments only to mutual funds. I do not want to subject my kids accounts to be accessible for my employer's compliance office. Credit union accounts like DCU so far fit the bill for me. I am NOT opening brokerage UTMA accounts for my kids. They will be adults soon enough (class of 2023), they can decide for themselves at that time.

[zymurgist]

Fidelity UTMA accounts with VT.

Easy peazy.

We pretty much took this approach for my teenage son. Since he has earned income from jobs, we opened a Fidelity UTMA Roth IRA with positions in FZROX and FZILX. Both funds have a $0 minimum investment. Easy peazy indeed.

[BashDash]

I recently was thinking about this. Currently I have 529s which I frontloaded for both kids. Minimal new contributions because I don't like the flexibility. But at least that initial frontload should grow nicely for 18 years.

Was thinking of another idea:
With other birthday money beyond that grew bigger than I want to have getting little to no interest. In my taxable account I was thinking of picking two separate total market etfs. One kid can get ishares total market and the other schwab total market. This will still earmarked for them even though it is in my account. Then when older I can have them track it with me and I can gift it to them. Is this idea plausible? Has anyone else tried this? I'm not talking a lot of money at all maybe 1500 per kid at this point.

[brad.clarkston]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

K - I'm not going to put "this" money into a 529 - that was the second line of my post. . .thanks for trying

And you totally missed the point but I expected that.

Brad - your point is not relevant - and therefore not actionable - when I specifically state what I am NOT going to do in the second line of my post. . .you “missed” it. . .

You must assume that I don’t already have 529 accounts established and funded for my kids. . .that box has been checked. . .did you expect that? It appears not. . .

I assumed it because you did not state it. Normally when you find someone ardently against a 529 they have no idea what it really is.
Fill in the blanks fully and you might get less not actionable responses.

But ether way I hope it all works out for you.

[Exchme]

The honest answer is a 529 is the best option whether it's liked or not. $50 a pay period (or more) *tax-advantaged* for education which is arguably the second biggest indicator of there future growth outside of health can't be understated. The better education options that you give them that do not require a ton of student loan debt the better off they will be in life. There is very little difference in a 401k and a 529 other than what it can be spend on and the fact that one account can be used across generations.

Why a UTMA or UGMA? To me those are magical thought exercises. What is the difference between that and a regular 529/ira/roth? I haven't found one better than a traditional account and your still the account custodian.

K - I'm not going to put "this" money into a 529 - that was the second line of my post. . .thanks for trying

And you totally missed the point but I expected that.

Brad - your point is not relevant - and therefore not actionable - when I specifically state what I am NOT going to do in the second line of my post. . .you “missed” it. . .

You must assume that I don’t already have 529 accounts established and funded for my kids. . .that box has been checked. . .did you expect that? It appears not. . .

I assumed it because you did not state it. Normally when you find someone ardently against a 529 they have no idea what it really is.
Fill in the blanks fully and you might get less not actionable responses.

But ether way I hope it all works out for you.

The great thing about this forum is that lots of people interested in the topic see the responses, not just the OP. I was interested as we set up a 529 for our grandson and have wondered from time to time if that was the right investment vehicle. Sounds like it was a reasonable choice.

[Westwing]

My teenage daughter was interested in the Roth concept on top of her normal savings. I fed her some reading information and she was convinced. Opened a custodial Roth for her and she and I split the $1000 minimum to start with Vanguards Star Fund. VGSTX is a balanced fund at 60/40. She continues to contribute a percentage of some earned income each month and I continue to match it. Glad she is interested and at this point I am willing to help. Great fund and easy to do.

[dru808]

My teenage daughter was interested in the Roth concept on top of her normal savings. I fed her some reading information and she was convinced. Opened a custodial Roth for her and she and I split the $1000 minimum to start with Vanguards Star Fund. VGSTX is a balanced fund at 60/40. She continues to contribute a percentage of some earned income each month and I continue to match it. Glad she is interested and at this point I am willing to help. Great fund and easy to do.

Vanguard star was my first ever fund, it was a fine fund for the 5 years it was my main investment, still hold $300 of it for sentimental reasons.

[er999]

You can open a uniform gift to minor account at tdameritrade and and buy an etf with no fees. I did it for my 10 year old when he wanted to invest some of his money. He now owns 1 share of the vanguard total international index etf that he bought for around $60.

[LateStarter1975]

My teenage daughter was interested in the Roth concept on top of her normal savings. I fed her some reading information and she was convinced. Opened a custodial Roth for her and she and I split the $1000 minimum to start with Vanguards Star Fund. VGSTX is a balanced fund at 60/40. She continues to contribute a percentage of some earned income each month and I continue to match it. Glad she is interested and at this point I am willing to help. Great fund and easy to do.

A friend literally asked me to help him invest his teenage son's $3,000 which the son made working last summer. I have suggested opening a Roth IRA for the son. Quick question: does your daughter have to file taxes after contributing to the Roth IRA from her income and if so, how does one go about doing that? I want to check every box before I go help my friend with opening the custodial Roth IRA account for his son. Thanks.

[Wiggums]

A child is required to file an income tax return depending on what his total income is for the year. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return)

Roth IRA contributions aren't taxed because the contributions you make to them are usually made with after-tax money, and you can't deduct them. Earnings in a Roth account can be tax-free rather than tax-deferred. So, you can't deduct contributions to a Roth IRA.

[Westwing]

Hey Laterstarter. My daughters income was not large enough to force her to file and she did not have any Federal withholding held to claim a refund. It has been fun to watch her accept some discipline to earn a few dollars, systematically save some and now flow some into the Roth. As I said, at this level, I am happy to help her with some contributions. It is more to set an example.