Investment accounts for kids (18+ y/o)

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bwalling
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Investment accounts for kids (18+ y/o)

Post by bwalling »

Two kids, 18 and 20. 20 year old has income.

Want to open investment accounts for them for Christmas this year. Assuming I can open a Roth for the 20 y/o because she has income, and that it's fine for us to fund that (up to her income). Assuming for the 18 y/o, I just have to open and individual taxable account.

What's the best way to do this through Vanguard (our accounts are all at Vanguard)? They're both 18+, but would like to be able to set it up for them as much as I'm allowed (they'd need to sign and agree I'd assume).
oldfatguy
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Re: Investment accounts for kids (18+ y/o)

Post by oldfatguy »

Why not just give them the money and have them take care of opening whatever accounts they want?
jebmke
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Re: Investment accounts for kids (18+ y/o)

Post by jebmke »

bwalling wrote: Wed Nov 23, 2022 9:43 am Two kids, 18 and 20. 20 year old has income.

Want to open investment accounts for them for Christmas this year. Assuming I can open a Roth for the 20 y/o because she has income, and that it's fine for us to fund that (up to her income). Assuming for the 18 y/o, I just have to open and individual taxable account.

What's the best way to do this through Vanguard (our accounts are all at Vanguard)? They're both 18+, but would like to be able to set it up for them as much as I'm allowed (they'd need to sign and agree I'd assume).
I think they need to open up accounts in their name and then grant you access through the agency agreement that VG requires for access to accounts of others.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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retired@50
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Re: Investment accounts for kids (18+ y/o)

Post by retired@50 »

This sounds like a perfect opportunity to set up the accounts together, side by side, sitting at a computer. Let the children drive the keyboard and mouse, reading each screen, using their own social security numbers, etc. You can stand by and explain the purpose of each account type, taxable, Roth IRA, etc.

I'd say a taxable account for the kid with no income, and a Roth IRA for the kid with income. Start with the money market account (settlement fund) then go from there once the deposit(s) settle from their bank accounts.

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Topic Author
bwalling
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Re: Investment accounts for kids (18+ y/o)

Post by bwalling »

retired@50 wrote: Wed Nov 23, 2022 9:55 am This sounds like a perfect opportunity to set up the accounts together, side by side, sitting at a computer. Let the children drive the keyboard and mouse, reading each screen, using their own social security numbers, etc. You can stand by and explain the purpose of each account type, taxable, Roth IRA, etc
This is the obvious answer. Sometimes, I’m not sure why I miss the dead obvious answer. Got caught up thinking about how to do it myself without thinking it’s far easier to just show them how.
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Re: Investment accounts for kids (18+ y/o)

Post by retired@50 »

bwalling wrote: Wed Nov 23, 2022 11:06 am
retired@50 wrote: Wed Nov 23, 2022 9:55 am This sounds like a perfect opportunity to set up the accounts together, side by side, sitting at a computer. Let the children drive the keyboard and mouse, reading each screen, using their own social security numbers, etc. You can stand by and explain the purpose of each account type, taxable, Roth IRA, etc
This is the obvious answer. Sometimes, I’m not sure why I miss the dead obvious answer. Got caught up thinking about how to do it myself without thinking it’s far easier to just show them how.
You've been teaching your kids for 20 years, why stop now!!! :happy

They shouldn't think the Vanguard site is only for their parents.

Regards,
This is one person's opinion. Nothing more.
the_wiki
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Re: Investment accounts for kids (18+ y/o)

Post by the_wiki »

Fidelity has a $150 bonus right now for new accounts with only a $50 deposit, if you are not dead set on Vanguard. They seem to have a better brokerage experience.

The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her. But worth a try. $150 boost in a Roth could compound into a few grand extra over 45 years.
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CAsage
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Re: Investment accounts for kids (18+ y/o)

Post by CAsage »

I would also suggest, after they open the account, they print a deposit ticket (If mailing in a check is the easiest way to fund). If you are linked to their other accounts, you could transfer it, have them go through the karmic pain of learning how to link accounts and transfer the money. Then sit with them and teach them how to invest it from the settlement account to ETF or mutual funds (easier at this age). I will note our college student views this as much fun and rewarding as cleaning the shower, but it will pay off in the long term (and the $$$). You can do this "remotely" by doing a share screen on Zoom.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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bwalling
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Re: Investment accounts for kids (18+ y/o)

Post by bwalling »

the_wiki wrote: Wed Nov 23, 2022 4:11 pm Fidelity has a $150 bonus right now for new accounts with only a $50 deposit, if you are not dead set on Vanguard. They seem to have a better brokerage experience.

The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her. But worth a try. $150 boost in a Roth could compound into a few grand extra over 45 years.
Not tied to Vanguard, just where our money is. I’ve actually thought about switching to Fidelity because Vanguards site is annoyingly hard to use in the rare times I need to do something. Fidelity might be a better call from them since it’s much less painful. There is also a local office, so that might help with verification or account opening for the 18 y/o, who has no credit history.
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Re: Investment accounts for kids (18+ y/o)

Post by jebmke »

bwalling wrote: Wed Nov 23, 2022 4:27 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm Fidelity has a $150 bonus right now for new accounts with only a $50 deposit, if you are not dead set on Vanguard. They seem to have a better brokerage experience.

The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her. But worth a try. $150 boost in a Roth could compound into a few grand extra over 45 years.
Not tied to Vanguard, just where our money is. I’ve actually thought about switching to Fidelity because Vanguards site is annoyingly hard to use in the rare times I need to do something. Fidelity might be a better call from them since it’s much less painful. There is also a local office, so that might help with verification or account opening for the 18 y/o, who has no credit history.
Makes sense. With ETFs now, the ability to use VG investment products on another platform provides a choice that didn't really exist when I consolidated at VG (from FIDO). I have not (yet) been affected by the VG site's annoying changes -- my needs are simple. But if I were to start now, I'd probably look at either FIDO or Schwab. If VG actually starts to adversely affect me, I'd consider moving as well.
When you discover that you are riding a dead horse, the best strategy is to dismount.
dbr
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Re: Investment accounts for kids (18+ y/o)

Post by dbr »

bwalling wrote: Wed Nov 23, 2022 4:27 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm Fidelity has a $150 bonus right now for new accounts with only a $50 deposit, if you are not dead set on Vanguard. They seem to have a better brokerage experience.

The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her. But worth a try. $150 boost in a Roth could compound into a few grand extra over 45 years.
Not tied to Vanguard, just where our money is. I’ve actually thought about switching to Fidelity because Vanguards site is annoyingly hard to use in the rare times I need to do something. Fidelity might be a better call from them since it’s much less painful. There is also a local office, so that might help with verification or account opening for the 18 y/o, who has no credit history.
I have found that the local office at Fidelity is a good way to bypass some obstacles that might exist for that sort of thing. I had a document that needed a medallion guarantee if done by mail but was a one minute transaction in person.

I hold Vanguard ETFs in a Fidelity account, but our accounts there go back 40 years or more.
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Re: Investment accounts for kids (18+ y/o)

Post by retired@50 »

the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
This is one person's opinion. Nothing more.
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Re: Investment accounts for kids (18+ y/o)

Post by jebmke »

retired@50 wrote: Wed Nov 23, 2022 4:36 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
Credit checks are often used as a form of identity verification.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Re: Investment accounts for kids (18+ y/o)

Post by retired@50 »

jebmke wrote: Wed Nov 23, 2022 4:38 pm
retired@50 wrote: Wed Nov 23, 2022 4:36 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
Credit checks are often used as a form of identity verification.
I would have figured a valid SSN would do the trick. This seems a little exclusionary in my book. I get that there are "know your customer" rules but requiring a credit history seems a bit much.

Regards,
This is one person's opinion. Nothing more.
dbr
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Re: Investment accounts for kids (18+ y/o)

Post by dbr »

retired@50 wrote: Wed Nov 23, 2022 4:36 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
See here for example: https://bankautomationnews.com/uncatego ... ing-works/

Step 1: Verify that someone with the applicant’s name, address, and social security number exists.

To complete step one, most online identity verification systems call out to one of the big three credit bureaus,Experian, Equifax, and TransUnion, who then search for an identity match within their vast repositories of consumer credit data.

Calling out to the credit bureaus is the cheapest way to complete step one, but unfortunately people with thin credit files, usually young people, recent immigrants, or people who for some reason have very rarely used mainstream financial services, often cannot be matched. To address this problem a number of companies, including LexisNexis, IDology, and RSA, offer services that search for matches in alternative sources of data, including utility and phone bills, property deeds and rental payments, and other public records. Andera has offered an optional alternative data “waterfall” service to its clients for several years.


It is not clear that an 18yo has untility or phone bills, deeds, or rental payments either. Another reason to do this in person if possible.
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Re: Investment accounts for kids (18+ y/o)

Post by jebmke »

dbr wrote: Wed Nov 23, 2022 4:45 pm
retired@50 wrote: Wed Nov 23, 2022 4:36 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
See here for example: https://bankautomationnews.com/uncatego ... ing-works/

Step 1: Verify that someone with the applicant’s name, address, and social security number exists.

To complete step one, most online identity verification systems call out to one of the big three credit bureaus,Experian, Equifax, and TransUnion, who then search for an identity match within their vast repositories of consumer credit data.

Calling out to the credit bureaus is the cheapest way to complete step one, but unfortunately people with thin credit files, usually young people, recent immigrants, or people who for some reason have very rarely used mainstream financial services, often cannot be matched. To address this problem a number of companies, including LexisNexis, IDology, and RSA, offer services that search for matches in alternative sources of data, including utility and phone bills, property deeds and rental payments, and other public records. Andera has offered an optional alternative data “waterfall” service to its clients for several years.


It is not clear that an 18yo has untility or phone bills, deeds, or rental payments either. Another reason to do this in person if possible.
When I first tried to create a My Medicare account it failed. They used my cell phone service as a place to hit for ID but the service was originated by my wife so the hit failed. I ended up having to go in to SS with ID to get the account activated.

With the amount of ID theft and hacking these days stronger verification is better, inconvenience notwithstanding.
When you discover that you are riding a dead horse, the best strategy is to dismount.
the_wiki
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Re: Investment accounts for kids (18+ y/o)

Post by the_wiki »

retired@50 wrote: Wed Nov 23, 2022 4:36 pm
the_wiki wrote: Wed Nov 23, 2022 4:11 pm The only issue may be verification. I tried to open one up for my 19 yo and since she has no credit, they could not verify her.
I'm puzzled as to why someone should need a credit history to open a brokerage account?

Did Fido offer any explanation? It's not as if your 19y/o is asking for a loan.

Regards,
I wish they offered any explanation. The error was basically just, "Could not verify you, tough luck." And then kicked us out to the main screen.

We were not married to Fidelity so she ended up going elsewhere. And she did have to jump through a few extra verification hoops, but at least they walked us through that online after creating the account, rather just saying, "nope!".
the_wiki
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Re: Investment accounts for kids (18+ y/o)

Post by the_wiki »

CAsage wrote: Wed Nov 23, 2022 4:25 pm I would also suggest, after they open the account, they print a deposit ticket (If mailing in a check is the easiest way to fund). If you are linked to their other accounts, you could transfer it, have them go through the karmic pain of learning how to link accounts and transfer the money. Then sit with them and teach them how to invest it from the settlement account to ETF or mutual funds (easier at this age). I will note our college student views this as much fun and rewarding as cleaning the shower, but it will pay off in the long term (and the $$$). You can do this "remotely" by doing a share screen on Zoom.
I just gave them a check to deposit and then transfer over themselves. Unless you don't trust your kid to deposit the money as agreed, it seems like the easiest way for the parent. Plus by doing that, as you said, it gets their checking account linked up so they can make regular deposits themselves in the future.
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Re: Investment accounts for kids (18+ y/o)

Post by CAsage »

the_wiki wrote: Wed Nov 23, 2022 6:04 pm
CAsage wrote: Wed Nov 23, 2022 4:25 pm I would also suggest, after they open the account, they print a deposit ticket (If mailing in a check is the easiest way to fund). If you are linked to their other accounts, you could transfer it, have them go through the karmic pain of learning how to link accounts and transfer the money. Then sit with them and teach them how to invest it from the settlement account to ETF or mutual funds (easier at this age). I will note our college student views this as much fun and rewarding as cleaning the shower, but it will pay off in the long term (and the $$$). You can do this "remotely" by doing a share screen on Zoom.
I just gave them a check to deposit and then transfer over themselves. Unless you don't trust your kid to deposit the money as agreed, it seems like the easiest way for the parent. Plus by doing that, as you said, it gets their checking account linked up so they can make regular deposits themselves in the future.
That's a good point, and I will do that. Just stuck in "old school" mode I'm afraid. After all, if it's not handled the way I bloody well tell them to, then the bank of Mom&Dad closes.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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bwalling
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Re: Investment accounts for kids (18+ y/o)

Post by bwalling »

Given the potential hang ups on ID verification (18 yo is at home in high school - no bills or history), what are people’s thoughts on Merrill Edge? They both have accounts with BofA, and BofA has local offices.
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AllMostThere
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Re: Investment accounts for kids (18+ y/o)

Post by AllMostThere »

Yes, now is best time to "help" your +18 yr old children to open investment accounts @ Fidelity. Until 12/2, Fidelity is offering a Holiday deal where they will add $150 to the account upon receipt of $50 deposit. Work with them, together to open the accounts online and link their external bank accounts. If they have any income this year, then yes, most definitely open a Roth IRA up to their gross income for 2022. I have been funding Roth IRA's for both my DD & DS for several years to give them a kickstart in life and my way of paying-it-forward. Not sure if the 20 yr old with income can double dip on the $150 match, but worth a try. :beer

Fidelity $150 Holiday Bonus
https://www.fidelity.com/go/special-offer/holiday

For the BH's with Teen Children, Fidelity is also offering $50 Bonus with new youth account. Your teen will get a $50 reward once they download the Fidelity mobile app and activate their Youth Account. I did this for both by DD & DS. Accounts come with a Fidelity Debit Card. They both were responsible for managing their accounts (with my initial education tips) and debit card usage. Great product.

Fidelity $50 Teen Account
https://www.fidelity.com/go/youth-accou ... igMdqU4KNg
It is not about how much you make, it is about how much you keep and how well you invest it.- Author Unknown | Don't buy Index annuity. Your future self or your heirs will thank you.- Author AllMostThere
the_wiki
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Re: Investment accounts for kids (18+ y/o)

Post by the_wiki »

bwalling wrote: Thu Nov 24, 2022 7:38 am Given the potential hang ups on ID verification (18 yo is at home in high school - no bills or history), what are people’s thoughts on Merrill Edge? They both have accounts with BofA, and BofA has local offices.
Anywhere that offers access to low fee index funds is fine. The main hurdle is just to get started so that compound interest snowball can start rolling.

All the brokers have their pros and cons, but for a boring, buy and hold portfolio, it doesn’t much matter where you go.
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