Investing for Your Kids

The Three Questions

Investing for Your Kids

Once you've decided to invest for your children, you have three fundamental choices to make:

  1. Who do you want to have ownership of the account (you or your child)?
  2. What kind of account do you want (an education IRA, a regular IRA, a non-IRA account, etc.)?
  3. What are you going to put into that account (index fund, growth stocks, etc.)?

The answer to the first question has lots to do with tax consequences and, later, control of the money; the answer to the second has exclusively to do with taxes; and the answer to the third has to do with rates of return.

What's the goal?

The primary goal, we submit here -- to state it baldly and brazenly -- is to have as much money as possible available to you, after taxes, when your child's savings are cashed in. That's it! We want you and yours to be flush with moolah!

A second -- and potentially just as important goal -- is to teach your child about investing as she grows. This goal, however, can be accomplished no matter which of the investment vehicles suggested here you decide to take. The last article in this collection will suggest some ways for you to do that and provide you with some links to articles in Fooldom which have touched on this very subject.

So, as we embark on this voyage together, we invite you to think of it as a chance to choose your vessel. Your goal is to get as far as possible into the deep green reaches of the Ocean of Flush. You first choose the skipper (you, for now, but later will you hand over the helm to your child?); you then select the boat (the kind of account); and finally you choose the fuel -- what's powering that boat (the stocks, index funds, etc).

So let's move now to select a skipper and a boat for your very own Ship of Fools.

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