Opening an investment account for children

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Archer4995
Posts: 22
Joined: Sat Nov 29, 2014 12:07 pm

Opening an investment account for children

Post by Archer4995 »

Looking to open an investment account for each of my small children… We are already doing 529's for education so this will be completely different. Was just thinking about doing something like a total Stock market index for each of them and adding to it periodically.

How would one go about doing this and are there any special vehicles or would I just do a taxable account for each of them? I'm with Vanguard for my other investment vehicles by the way. Thanks in advance!
WorkToLive
Posts: 729
Joined: Thu Nov 12, 2009 1:19 pm

Re: Opening an investment account for children

Post by WorkToLive »

I opened a UTMA for my daughter and put Total Stock Market Index and Total International Stock Market in it.
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 1:39 pm

Re: Opening an investment account for children

Post by Spirit Rider »

Just be aware that if there is a plausible case for the children to qualify for financial aid, UTMA balances will be counted heavily. Even if that is the case, it may be worthwhile if the money will be spent prior to 1/1 of their junior year. This could be for extra curricular activities, summer travel, tablet/computer, first vehicle, etc...
Casper
Posts: 311
Joined: Tue Oct 15, 2013 8:32 pm

Re: Opening an investment account for children

Post by Casper »

I did this a couple years ago for our two kids. I avoided UTMA for the reasons stated by another poster. I simply bought a separate batch of Total Stock Market in my existing Vanguard taxable account, and add to it periodically. It's under my name, but appears separately in my account and is earmarked (in my head) for them.

We already have 529s, but wanted to invest some money separately for when they're ready to buy a house or have other big post-college expenses. They are ages 5 and 2 so I'm just leaving it in TSM for the foreseeable future.

To some extent it's just mental accounting (the money could easily have just been rolled into our existing tranche of TSM), but we wanted to cordon it off, and potentially use it as a teaching tool when the time comes.
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janiebegood
Posts: 97
Joined: Mon Feb 03, 2014 7:35 am

Re: Opening an investment account for children

Post by janiebegood »

Casper wrote:I did this a couple years ago for our two kids. I avoided UTMA for the reasons stated by another poster. I simply bought a separate batch of Total Stock Market in my existing Vanguard taxable account, and add to it periodically. It's under my name, but appears separately in my account and is earmarked (in my head) for them.

We already have 529s, but wanted to invest some money separately for when they're ready to buy a house or have other big post-college expenses. They are ages 5 and 2 so I'm just leaving it in TSM for the foreseeable future.

To some extent it's just mental accounting (the money could easily have just been rolled into our existing tranche of TSM), but we wanted to cordon it off, and potentially use it as a teaching tool when the time comes.
That's what we did too - opened a new taxable account and invested in the Fidelity Four-in-One Fund (85/15 mix) in our names. When our teenage daughter reaches 18 (or 21, or 25, depending) we will add her name to the account, then eventually remove our names and let that account be hers alone.
Runner01
Posts: 291
Joined: Thu Dec 12, 2013 6:14 pm

Re: Opening an investment account for children

Post by Runner01 »

We opened an UTMA brokerage at TD Ameritrade for our son when he was born. There is no account fee and we buy VTI commission free. We deposit monthly cash gifts from grandparents in the account and fully understand the potential implications associated with an UTMA account. Lets just hope he buys a house with the money when he is 21 instead of a Ferrari!
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