Viewing a single comment thread. View all comments

Over_Island7030 t1_iyey58n wrote

I’d say create a 529 account on a brokerage firm (like Fidelity, Charles Schwab, etc) and put your money in there. It is safer to invest in broad-market ETFs and low-cost mutual funds if you are starting early - 18 years is a lot of time for compounding. Switch to certificate of deposits or bonds when they get older.

7

deeznutzz3469 t1_iyeynzx wrote

My only add here would be to look at state run 529s. I think there is a website that ranks all of them if I am not mistaken. NYS one had good find options and you get a state tax rebate for your contributions

6

Fitgiggles OP t1_iyf01k8 wrote

I’m in CA so there’s no added tax benefit to me

3

deeznutzz3469 t1_iyf4gl4 wrote

Gotcha then I would suggest vanguard or another low fee broker

3

Fitgiggles OP t1_iyez58r wrote

Thank you so much for you input! I did consider a 529 but neither my husband or I went to college and we make more than most of our college educated friends…From what I understood, 529 can be used for private school or trade school also but our trades had free apprenticeships so a 529 scares me as it may be unusable. Of course my kid may want to go to college but I’d rather have some sort of investment acct we can freely take from to pay for it in that case. I’ve never looked into CDs so maybe that’s an option to just go for now? I’m ok if I have to move the money every few years, I just don’t want to have to be on top of it month to month.

1

TyrconnellFL t1_iyezsej wrote

You’re still better off with an account in your child’s name and investing in broad index funds. A CD or better savings account is safer, but it isn’t better. Over long timelines, like the next 18+ years, if the market behaves like it always has then it will go up more than any other safe investment will.

5

MikeWPhilly t1_iyf039i wrote

So I’m of the opinion that unless you go to school for engineering, specialties like healthcare, financial - college is quickly reaching the point of not worth the cost investment. I say that to say I get where you are coming from.

So if not doing a 529 you have a few options.

  1. Real Estate Investment which is passive income for you and them. The money/equity would appreciate and you’d be generating passive income that they could either take over and/or you could take out equity in 25 years or so.
  2. Stocks. I get not wanting to lose the money and you won’t really lose savings but cds at best “might” keep up with inflation. Historically if you stuck money in an index fund S&P as an example, you’d never lose money on any 20 year period. You’d typically would gain quite a bit. So you wouldn’t have ot baby sit it but just ike your 401k you’d have to realize you’d have some very good years (last 10 before 2022) and some not great years ike this year. But over the lifetime of it you’d appreciate quite a bit.
2

Over_Island7030 t1_iyf2hmk wrote

A 529 is not a use-it-or-lose-it type of account! As far as I’m aware, all contributions you make can be taken out penalty-free. Any earnings you take out for non qualified expenses will be treated as income tax (just like a normal, taxable brokerage account) plus 10% penalty. This means that you can withdraw for whatever reasons.

The benefit of a 529 is that any growth in investment value can be used to pay for educational expenses tax free. Depending on your tax, it’s sort of like getting a 30% discount on education expenses.

You can create a brokerage account just for investing (many of the brokerage firms I listed have automatic investment options) but do be aware that you will pay taxes on all withdrawals related to earnings.

2