Best Thing for the Kids?


J

JACK-CALI

Hi everyone.. am I doing the right thing (as a complete novice) or can
someone point me in a better direction. I like putting a bit away for
the kids when I can (granted its not a lot of money)... They are 10
yrs and 9yrs.
I put $3000 each into a brokerage account for them. $1500 is still in
cash and $1500 has been in a mutual fund called FPPTX for the last
year. It has made a measly 2.95% (could/should I have done better?).

In addition to that one fund, I do put $50 each away for them a month.

So? should I move from FPPTX into ???? somethin else?
What should I do with the $1500 sitting in cash
How should I distribute the $50 a month?

Thank you soooo much..

JACK-UK
 
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F

FranksPlace2

I suggest you open custodial accounts (their name but you control) at a
large broker like Fidelity or Vanguard. Invest in index funds: 1/3
large cap, 1/3 mid cap and 1/3 small cap, $1000 each. These will grow
at market rates and not generate a lot of taxable income. In several
years when you take the money out, it will taxed at the lower capital
gains rate. You may be able to set up direct deposit for monthly
additions. There will be some account fees because you have small
balances.

Frank
 
T

Tess Millay

Hi Jack. I sent you here from misc.invest.mutual-funds
(with, I might add, high praise for MIFP, so /all/ you
regulars, take credit, doggone it). I figured someone would
suggest you investigate what are called "529 plans" (among
others), which are specifically designed for helping save
for one's kids' college educations.

I really don't know much about these, other than a lot of
folks like yourself use them. You can google for {529
college kids saving}, and a lot of good self-help sites come
up, or you can start with

http://money.howstuffworks.com/529.htm

Hopefully someone more knowledgeable will get back to you
with an overview of the best devices for saving for kids'
college educations, including allocation (cash, mutual
funds, CDs, savings bonds [which IIRC have some kind of tax
break when used for college tuition], etc.).
 
H

herlihyboy

Tess said:
Hi Jack. I sent you here from misc.invest.mutual-funds
(with, I might add, high praise for MIFP, so /all/ you
regulars, take credit, doggone it). I figured someone would
suggest you investigate what are called "529 plans" (among
others), which are specifically designed for helping save
for one's kids' college educations.

I really don't know much about these, other than a lot of
folks like yourself use them. You can google for {529
college kids saving}, and a lot of good self-help sites come
up, or you can start with

http://money.howstuffworks.com/529.htm

Hopefully someone more knowledgeable will get back to you
with an overview of the best devices for saving for kids'
college educations, including allocation (cash, mutual
funds, CDs, savings bonds [which IIRC have some kind of tax
break when used for college tuition], etc.).
The site below has been very helpful in educating me about the options
for my own children.

http://www.savingforcollege.com/

Ryan
 
N

Nosmo King

I suggest you open custodial accounts (their name but you control) at a
large broker like Fidelity or Vanguard.
If you are referring to the UTMA/UGMA accounts, I would recommend you consider
the following:

- The money is theirs to use as they wish once they reach adulthood (18, 21 or
whatever it is for your state). Even though you plan to use the money for
college, they can legally go spend it on a trip to Cancun, etc.

- Money in their name is rated differently than money in your name, for
eligibility for college financial aid. They are expected to use a much higher
percentage of their assets to pay for school.

- Tax return preparation is a pain, especially if you have more than one
child. Turbo Tax, etc makes it easier, but it's still a pain to have go
through the additional calculations.

If I had it to do over, I would not have created UTMA accounts for my kids.
The few dollars of tax savings was not worth the other aggrevations.
 
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D

Dave Dodson

Nosmo King wrote
- Tax return preparation is a pain, especially if you have more than one
child. Turbo Tax, etc makes it easier, but it's still a pain to have go
through the additional calculations.
I didn't think doing my kids' taxes was that hard. I just filed
separate returns for them. Since I was familiar with Form 1040, I filed
that even though they could have gotten by with 1040A. As I recall, it
took no more than 15 minutes each.

When they were pre-school, I had them sign their returns with a crayon.
I thought it was a nice touch.

Dave
 
N

Nosmo King

Nosmo King wrote


I didn't think doing my kids' taxes was that hard. I just filed
separate returns for them. Since I was familiar with Form 1040, I filed
that even though they could have gotten by with 1040A. As I recall, it
took no more than 15 minutes each.
It's been a few years since I've had to do the extra calculations (when they
were under 14). I seem to recall the hassel being that you had to input
information from the parents and siblings returns into the tax program for
each child (separate 1040 for each), and then repeat for the others.
 
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C

clemster

First off Jack, I'd get the funds into a qualified (i.e. tax deferred)
plan. Either a ESA (Education Savings Account), or a 529 plan. They
have different pluses and minuses, so check it out carefully, even a
combination of the two could be advantageous.

Also, consider using a Roth, you can have the money working and if
they decide not to go to college, your retirement will be a little
brighter.

As far as the mutual fund selection goes, start by looking at fees.
American Funds run about half the industry average, and performance is
consistent and for certain funds in the family been very good.

Get that cash working for you. 8yrs +/- to go is a fair run to have
most if not all working in at least a decent growth and income fund.

Most important, get an advisor who will coach you face to face, not a
broker, (think about just the name).

Good luck
 

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