Investing for Your Kids
Investing for Your Kids
As a parent, you want to teach your children about investing because you understand that nothing can touch the sweetness of long-term growth.
In addition to putting away money for your own retirement, you'd like to have an account earmarked for your child. As she gets older, you'll be able to tell her that she has this account, and at a certain point, having watched it grow from acorn to oak, she'll happily take shelter in its shade. Because you've introduced her to the magical concept of compound returns, and because she's already excited at the fact that her account total has shot up like Jack's magic beanstalk, she will be unlikely to chop the thing down, pull out the money, and splurge it on her "Treasure-hunting Spanish Booty in the Strait of Hormuz" fantasy trip.
In addition, since she's heard how college can expand the mind every bit as much as travel, and since many of her friends are heading off to higher education, she'll come to see that this is her ticket. 'Twould be foolish (not Foolish) to throw away her ticket to a better life.
If, on the other hand, she decides she's going to go to New York, to live in a hovel, to gargle with Drano, and to become the next raspy blues singing sensation, well, maybe you'll have to let her do that. But at least if you've planned ahead you'll have the option -- and you'll be able to let her have the option -- when the time comes.
To this end, we're going to illuminate the following shadowy issues:
- Who do you want to control the account -- you or your child?
- What kind of account can you set up? Is a custodial account your best bet, or a guardian account -- and what the heck is the difference, anyhow? How do the various types of IRA accounts fit into the picture? Are there substantial tax benefits? What about restrictions?
- Once you've decided on the type of account, what can you put into it? Money market accounts? CDs? Stocks?
- How exactly do you go about setting up an account?
- How can you teach your child about this great investment oak even as it grows?
If this dizzying panoply of questions hasn't sent you running for the hills, then hold out your hand. We'll take you where you want to go, as far as we can, and then, like the trusty, crusty guide who must turn back and head for his own hearth and home; like the Momma who tearfully kisses her little boy goodbye as he boards the bus to college (or to seek his fame and fortune with the rodeo, for that matter) we'll send you on your way. You'll be well-armed for skirmishes on the playing fields of finance.
All right then. Buckle up. Strap on your chainmail and ready your mace. The clarion call to action fills the air and swells our hearts with brave and clear-eyed foresight. Click, click on, O ye sons and daughters of the Commonweal!
Or, put less pompously: Read on!