How to Invest Down Payment Money for Child? 18 Years Out

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Jon_PassiveInvestor
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Joined: Sat Mar 12, 2011 10:23 pm

How to Invest Down Payment Money for Child? 18 Years Out

Post by Jon_PassiveInvestor » Wed Sep 11, 2019 7:47 am

My son is around 18 years out from buying his first home. What would you recommend I use in terms for funds/vehicles to store this money? Thank you!

Rob Bertram
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Joined: Mon May 05, 2014 12:15 pm

Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by Rob Bertram » Wed Sep 11, 2019 7:54 am

A lot can happen in 18 years. He might be in a very different situation where renting is a better choice. If this is your money, invest it according to your IPS and revisit when you are closer to the actual event. If it is his money, he should invest according to his IPS.

Topic Author
Jon_PassiveInvestor
Posts: 109
Joined: Sat Mar 12, 2011 10:23 pm

Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by Jon_PassiveInvestor » Wed Sep 11, 2019 9:10 am

Rob Bertram wrote:
Wed Sep 11, 2019 7:54 am
A lot can happen in 18 years. He might be in a very different situation where renting is a better choice. If this is your money, invest it according to your IPS and revisit when you are closer to the actual event. If it is his money, he should invest according to his IPS.
So, maybe a Money Market Fund? I want to let this money aside in its own place and not touch it.

MotoTrojan
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by MotoTrojan » Wed Sep 11, 2019 9:14 am

Jon_PassiveInvestor wrote:
Wed Sep 11, 2019 9:10 am
Rob Bertram wrote:
Wed Sep 11, 2019 7:54 am
A lot can happen in 18 years. He might be in a very different situation where renting is a better choice. If this is your money, invest it according to your IPS and revisit when you are closer to the actual event. If it is his money, he should invest according to his IPS.
So, maybe a Money Market Fund? I want to let this money aside in its own place and not touch it.
I can’t think of anywhere worse for an 18 year holding. I’d probably use a 40/60-60/40 Lifestrategy fund if you really want to be hands off, or a target retirement fund that will get it to 30/70 by the time it’s ready to withdraw.

3funder
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by 3funder » Wed Sep 11, 2019 9:29 am

With all due respect, there is no way to know exactly when your son will purchase a home. I recommend that you save for your son's college and let him deal with home ownership when the time comes. Most likely, it will come later than you think. Also, what if he meets his significant other and he/she owns a home? It is possible that he'd be the one to move in. This would either eliminate the need for him to purchase a home or make it a waste to do so if he winds up having to sell after having owned it for no more than a few years.
Last edited by 3funder on Sat Sep 21, 2019 9:47 am, edited 1 time in total.

megabad
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by megabad » Wed Sep 11, 2019 9:43 am

Assumptions:
You are wealthy and therefore in a high tax bracket (since you have extra money to put away for this).
You and spouse have already maxed out all tax advantaged accounts (since this would be the best place for the money first).
Son has already maxed out his tax advantaged accounts (not sure what his situation is, but this would also be a preferable place for the money)

If above are true, I would just dump all the money into Total Stock Market Index for now. Simple, tax efficient and a good long term option in my opinion. Revisit in 10 years.

oldfatguy
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by oldfatguy » Wed Sep 11, 2019 10:18 am

Jon_PassiveInvestor wrote:
Wed Sep 11, 2019 7:47 am
My son is around 18 years out from buying his first home.
How on earth could you possibly know that?

emoore
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by emoore » Wed Sep 11, 2019 11:35 am

Jon_PassiveInvestor wrote:
Wed Sep 11, 2019 7:47 am
My son is around 18 years out from buying his first home. What would you recommend I use in terms for funds/vehicles to store this money? Thank you!
Total Market or S&P500 fund.

Whatyear?
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Location: Massachusetts

Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by Whatyear? » Wed Sep 11, 2019 11:53 am

oldfatguy wrote:
Wed Sep 11, 2019 10:18 am
Jon_PassiveInvestor wrote:
Wed Sep 11, 2019 7:47 am
My son is around 18 years out from buying his first home.
How on earth could you possibly know that?
Seriously, that was my question. Is he age 3 right now and planning to buy at 21? Or maybe 21 right now, planning on buying at age 39? Eighteen years seems like such a long timeframe for this question.

inbox788
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by inbox788 » Wed Sep 11, 2019 12:17 pm

3funder wrote:
Wed Sep 11, 2019 9:29 am
I'd go for the target date fund.
I would mirror a 529 plan rather than a retirement fund. The main difference is in the aggressiveness of the investments and the glidepath. For the most part if you're close to 80/20 the first 14 years and moving towards a short/mid duration bond or CDs in the last 4 years, you should be good.

Rob Bertram
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Re: How to Invest Down Payment Money for Child? 18 Years Out

Post by Rob Bertram » Wed Sep 11, 2019 12:33 pm

Jon_PassiveInvestor wrote:
Wed Sep 11, 2019 9:10 am
Rob Bertram wrote:
Wed Sep 11, 2019 7:54 am
A lot can happen in 18 years. He might be in a very different situation where renting is a better choice. If this is your money, invest it according to your IPS and revisit when you are closer to the actual event. If it is his money, he should invest according to his IPS.
So, maybe a Money Market Fund? I want to let this money aside in its own place and not touch it.
As many posters have already suggested, you can park this money in any fund and leave it alone for 18 years. Money in a MM fund will likely lose purchase power due to inflation. My recommendation was to invest this money according to your investment policy statement (IPS) if it is your money. For example, if you are comfortable with a 60% stock / 40% bond allocation, invest this money the same way. Pick your favorite balanced fund, and let it mellow for the next 18 years.

If you are putting money aside for your son's home, many are assuming that you already have sufficient savings for retirement. (Your son can borrow money to buy a home. You cannot borrow money to retire.) They would treat this as surplus money and suggest investing it in 100% stock because that is what their investment policy says.

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