OT: Investing in my child's future

[KC_Dawg]

I want to open a brokerage account to eventually give to my son. I want him to use it for things other than education so I'm leaning away from a 529, which leaves a traditional brokerage account or a custodial account. Has anyone here done this before? I am not savvy when it comes to investing so I'll take any good information the pack has to offer. Pros and cons to each of my options or a better plan. O would also like to set it and forget it so advice on what investments would make that happen would be nice (mutual funds vs ETF). I do plan on starting with an initial investment with future monthly contributions for what it's worth.
Thank you in advance.

 

[mcdawg22]

If you really want to invest in his future, raise him as an Alabama fan.

 

[patdog]

I would open a Unified Gifts to Minors account in his name with you as the custodian/manager. First $2,700 of income would be taxed at his tax rates, then anything over that would be taxed at your rates. You control the account until he turns 18 and then it's his. If you're looking for a set it and forget it, I'd invest in a 4* or 5* mutual fund from someone like Vanguard or T Rowe Price that meets your investment objectives (which may be as simple as a stock market index fund).

 

[The Peeper]

Waiting for the first Bitcoin suggestion any minute now..........

 

[dorndawg]

You probably already know this since you're looking into it, but for anyone who doesn't: 529 plans are very versatile and can be used for a lot of things beyond traditional higher education. 35,000 in a 529 can also be rolled into a Roth IRA now, as well.

American Funds

 

[anon1758050382]

Waiting for the first Bitcoin suggestion any minute now..........

I hadn't thought of that, but since you brought it up...

In terms of risk-adjusted return (and ease/simplicity), you can't beat dollar cost averaging into bitcoin for five plus years.

Because you are saving for your child, I'm assuming your time horizon is greater than five years, so using a long-term savings vehicle like bitcoin makes the most sense.

Someone will come here and say bitcoin is too risky, but according to my data (attached; up to Jan 2025), there isn't a 41-month period on record in which DCAing into bitcoin has had a negative nominal return. So, using 16 years of past performance (not indicative of future results), the worst case is you DCA for 3.5 years and break even. I round my recommendation up to five years for good measure. The worst 5-year period ROI I found was +55%.

I prefer CAGR over ROI when comparing investments:

 

[YesIAmAPirate]

Forget your kids. We need that money for NIL

 

[dorndawg]

Forget your kids. We need that money for NIL

Exactly. If this guy and 99 other fans put $5k a year into NIL instead of their kid's future, we could afford like the 8th best OLB in the whole SEC!

 

[DoggieDaddy13]

Forget your kids. We need that money for NIL

I really is all about choices.

 

[johnson86-1]

I want to open a brokerage account to eventually give to my son. I want him to use it for things other than education so I'm leaning away from a 529, which leaves a traditional brokerage account or a custodial account. Has anyone here done this before? I am not savvy when it comes to investing so I'll take any good information the pack has to offer. Pros and cons to each of my options or a better plan. O would also like to set it and forget it so advice on what investments would make that happen would be nice (mutual funds vs ETF). I do plan on starting with an initial investment with future monthly contributions for what it's worth.
Thank you in advance.

A couple of notes on the 529 v UTMA.

One, money in the UTMA will count dollar for dollar as assets of your child if he applies to financial aid for college. Even if you make good money, it's possible that he could qualify for aid at more expensive schools and having an UTMA instead of a 529 will reduce his aid.

Two, money in a 529 is no longer necessarily penalized if they don't use it for education. You can move it over to a Roth, with the caveat that the annual and lifetime limits on this is relatively low ($7k per year, which will presumably go up over time, and $35,000 lifetime, which may not go up over time). SO you son wouldn't be able to take his 529 money at 22 and use it for a downpayment for a house without penalty, but he could move $7,000 a year from his 529 into a Roth until the 529 runs out or he hits $35k (provided he has at least $7,000 of earning each year so that he qualified to roll it into the Roth). Five years after opening the Roth, he could move any of his contributions to the Roth out tax free. So if he started at 22, at 27 he could have $35k plus any returns in his Roth, and he'd be able to pull out the $35k for anything he wants, tax and penalty free. Or even better, he can leave it in there and have essentially a $35k emergency fund that is generating tax free returns.

 

[John Deaux VII]

I want to open a brokerage account to eventually give to my son. I want him to use it for things other than education so I'm leaning away from a 529, which leaves a traditional brokerage account or a custodial account. Has anyone here done this before? I am not savvy when it comes to investing so I'll take any good information the pack has to offer. Pros and cons to each of my options or a better plan. O would also like to set it and forget it so advice on what investments would make that happen would be nice (mutual funds vs ETF). I do plan on starting with an initial investment with future monthly contributions for what it's worth.
Thank you in advance.

If he has earned income, making Roth contributions would be the best way to go. Tax deferred is great, but tax exempt is better.

If he has no earned income, a brokerage account in his name (with you as custodian) would be the next best option. In that account, I would stick to a small number of index funds - an S&P 500 index would be all you need, really. I like index funds due to the lower fees and the fact their very nature keeps them from having to turnover stock holdings and and payout capital gain distributions (taxable income).

 

[dawgman42]

I want to open a brokerage account to eventually give to my son. I want him to use it for things other than education so I'm leaning away from a 529, which leaves a traditional brokerage account or a custodial account. Has anyone here done this before? I am not savvy when it comes to investing so I'll take any good information the pack has to offer. Pros and cons to each of my options or a better plan. O would also like to set it and forget it so advice on what investments would make that happen would be nice (mutual funds vs ETF). I do plan on starting with an initial investment with future monthly contributions for what it's worth.
Thank you in advance.

You never mention how old your son is. That also determines strategy.

I never gave any of my three children money for their education. I allocated/earmarked it for them in a 529. Down to the last year for the last child now, and she likely will have some left (but she may use the remainder in grad school). It's a bonus if there is any left over that I can roll into an IRA. And the earnings all grew tax-free for education purposes (which you don't want to be limited to). But 529 plans are pretty darn versatile what they cover.

I still say give to NIL and tell your son to be a welder/plumber. He'll make bank one day that he can then give to NIL (see how this circle of life works?).

 

[Bulldog45]

Forget your kids. We need that money for NIL

If I make a significant contribution to NIL and earmark it for my kid, does that mean MSU will have to put him on scholarship?

 

[KC_Dawg]

You never mention how old your son is. That also determines strategy.

I never gave any of my three children money for their education. I allocated/earmarked it for them in a 529. Down to the last year for the last child now, and she likely will have some left (but she may use the remainder in grad school). It's a bonus if there is any left over that I can roll into an IRA. And the earnings all grew tax-free for education purposes (which you don't want to be limited to). But 529 plans are pretty darn versatile what they cover.

I still say give to NIL and tell your son to be a welder/plumber. He'll make bank one day that he can then give to NIL (see how this circle of life works?).

He is 4.

 

[ronpolk]

I want to open a brokerage account to eventually give to my son. I want him to use it for things other than education so I'm leaning away from a 529, which leaves a traditional brokerage account or a custodial account. Has anyone here done this before? I am not savvy when it comes to investing so I'll take any good information the pack has to offer. Pros and cons to each of my options or a better plan. O would also like to set it and forget it so advice on what investments would make that happen would be nice (mutual funds vs ETF). I do plan on starting with an initial investment with future monthly contributions for what it's worth.
Thank you in advance.

Take your entire savings and go put it on whatever the under is for state’s football wins this year… then give the winnings to your son.

 

[greenbean.sixpack]

I reaseached all this 25ish years ago, I went with a Coverdell ESA (I can't remember why though). We bought a condo in Vegas when the first one started and used the moneys to make the payments, we're on kid three now (at State) and will do it with his money too.

I also opened brokerage and Roth IRA accounts for them.

 

[Dawgbite]

If I were investing in something like this I’d buy a fund that exactly mirrors the S&P 500.

 

[Jeffreauxdawg]

He is 4.

Give a boy a fish, feed him for a night. Teach him how to fish and he'll eat for a lifetime.

It's up to you how much you want to save for your kid. But make sure you spend a lot more money than you save taking him places and teaching him what it means to be a man. There is a lot of that missing these days.

I have 2 young boys and they're going to know how to: Work hard (at school and in life), treat people with respect, stand up for yourself and those who can't, throw a baseball, kill and clean a deer, catch and clean a fish, smoke a brisket the right way, swing a hammer, push a wheel barrow, repair a small engine, change the capacitor out on the outdoor heat pump when the AC goes out (it's always the capacitor), replace a garbage disposal, and the million other things it takes to plow your own road in life as a man. They'll get a nice inheritance at some point I'm sure, but first they'll chop their own wood.


My wife and I decided a long time ago that they're going to pay for their own college like we did. Scholarships and/or military.... Now all that said if I had girls instead of boys they'd be spoiled little princess that would never want for anything.

 

[PBRME]

Roth with your kid listed as the beneficiary?

 

[leeinator]

Pick a good brokerage company vs just picking mutual funds, etfs, or stocks. I like Fidelity. Schwab is good. Vanguard, etc. Get a good company and they usually have great products that will get you where you want to go.

 

[turkish]

Give a boy a fish, feed him for a night. Teach him how to fish and he'll eat for a lifetime.

It's up to you how much you want to save for your kid. But make sure you spend a lot more money than you save taking him places and teaching him what it means to be a man. There is a lot of that missing these days.

I have 2 young boys and they're going to know how to: Work hard (at school and in life), treat people with respect, stand up for yourself and those who can't, throw a baseball, kill and clean a deer, catch and clean a fish, smoke a brisket the right way, swing a hammer, push a wheel barrow, repair a small engine, change the capacitor out on the outdoor heat pump when the AC goes out (it's always the capacitor), replace a garbage disposal, and the million other things it takes to plow your own road in life as a man. They'll get a nice inheritance at some point I'm sure, but first they'll chop their own wood.


My wife and I decided a long time ago that they're going to pay for their own college like we did. Scholarships and/or military.... Now all that said if I had girls instead of boys they'd be spoiled little princess that would never want for anything.

Meh, I learned most of that stuff after 25.