Saving for a childs future (bonds? gold?)
 

Just curious what some of you are doing to save
for your child or grandchildrens future?
I started a while back buying savings bonds for my grandchildren.
My one son requested gold instead of savings bonds for
my granddaughter. He hasn't had time to educate me
in gold verses savings bonds and thought I'd see what folks had to say.
To my best guess figures, a bond doubles itself in 10 years.
This is better than a CD. My son feels gold is the best investment.
Has gold doubled in the last 10 years?
Since both my grandchildren are very well off in toys and clothes
so much so with double set of grandparents and great grandparents
that we have been asked to stop buying, I had already been thinking
about their future when I seen they had way more than they
needed in current needs stuff.
I'm curious to see what others are doing.

I did a mix of savings account, bonds, and cds. Savings account for if something is needed Asap, cds and bonds for longterm growth. Wished college savings accounts (529s) had been available when he was a baby, but I started saving for his college when he was around 5 and now here it is, 11 years later, and I still don't have enough!

I like 529 college savings accounts, especially the ones (like we have in VT) which give you a tax credit for your contributions (currently 10%, I believe, which means right off the bat in year one the account "earns" a 10% return), BUT...

You have to think carefully about who owns the account. If it is the child it may count against them at financial aid time and if it is the child while there are tax penalties for using the money for anything other than approved educational expenses you have no control over the account if that is exactly what the kid decides to do. So you might want to hold that account in trust for the child, knowing that if you need to tap it for something else, while you'll get dinged for taxes, you can do that.

A 529, the unused portion, can be rolled to the child's children, sibblings, and a host of other family members, somewhat loosely defined, but it can't be transfered outside of the family. Something people with blended "unrelated" families might want to consider before throwing pots of money into such an account.

The 529 can accept contributions from any number of people but there is a cap on how much it can actually contain (somewhere around a half million I think.. which falls into the "in your wildest dreams" category for us). Half a million would certainly get the kid through most of Vet School but if the account hits that point you are required to withdraw from it. I know... not bloody likely... but in the interest of full disclosure!

In addition to the savings you are doing for the kids you might also want to give the kids the benefit of saving for something themselves. Which means their own passbook savings account and a little ledger. What would they like to save for? Help them along by making a do-able target and then achieving the goal. Kids who start young and really get a grip around saving have a major leg up on the competition as they hit adulthood. That little savings account can blossom into discussions on the managing of credit long before your child is hit with card offers on campus and does something silly.

With out college savings funds we write the check and stick it into a postage paid envelope, which goes into the birthday card. Every quarter they get a copy of the statement showing them how "their" savings have grown. However... I do maintain control over those accounts. If the child makes bad decisions I want the ability to roll their account to another child... or drain it entirely. And I sure don't want "their" savings diminishing their eligibility for financial aide.

I admit it... where savings are concerned I am a control freak. I do not trust a child, or even their parents, to manage those accounts in the way I see fit. And since it is my resources going into those accounts, it is my name on those accounts.

I don't know anything about gold, but we use I-bonds for long-term savings. These are government savings bonds, but are different from the traditional EE's in two ways. First, you pay face value. A $50 EE costs $25; a $50 I costs $50. Second, the interest on an I is higher than EE because I interest is adjusted for inflation. I get better interest on our I-bonds than I can get in a savings account.

-Joy

My son has a savings account and a combination of mutual funds and stocks. We take him to the bank to make all of his own deposits in the savings account. He gets really excited seeing his balance grow, and always asks to see his statement. We also look at his stocks regularly and talk about how they work. He actually chose the companies he invested in (from a small group of good prospects chosen by Dad). We want him to learn about good money management from the start. I have seperate investments for college. I don't know enough about gold to have an opinion on that. Good luck!

Our particular state, Florida, offers prepaid college which is what we have chosen as a way to provide for our children's future. You basically lock into the college rates now and either pay one lump sum or pay monthly until the child graduates from high school. When they graduate they can attend any state school tuition free. They have up to ten years after finishing high school to start using it. If they don't use it, it can be rolled over to another sibling or we can draw it out. The down side is that if you choose to do the monthly payments you pay a small amount of interest which you will not get back. Also they have to attend, in our case, a Florida school.

We went with this program over the 529 because we didn't feel confident that our monthly contributions would make enough interest to keep up with the increase in tuition over the next ten or so years. Also this is backed by the state so I feel confident that if all else fails, as long as I make these payment my kids will get to go to college, if they so wish.

Donna

Oh yeah...I just got done reading an Agatha Christie short story where the late ecentric old uncle took all his money out of the bank, told everyone he was investing in gold but then bought a couple very rare stamps and put them on some falsified love letters and hid them in a secret drawer....if it weren't for the talents of Miss Marple the neice and nephew would have thrown them in the fire.

just a thought,
donna

We have bonds, 529s, UTMAs & whole life insurance

The bonds & UTMAs are from relatives (I'm not an UTMA fan)

We do the 529s and the whole life insurance

We bought the whole life insurance not for the insurance but for the investment aspect

529s ARE counted against financial aid, no matter if they're in the parents or children's name - they are an ASSET and must be listed as such when applying for financial aid

Whole life insurance is not considered an ASSET for financial aid purposes

Meaning, I can dump whatever I want into their life insurance & they can also use it for whatever they want - they don't have to use it for education

We did the college savings account here in VA - when we sold our town house in the middle of the HUGE real estate bubble here, we paid them off and were blessed to be able to do so.

Now they have another type of account available which can be used for room,board, and books - and we are looking into that (paperwork came yesterday).

Both kids have a savings account - and my son did 4-H last year and my daughter will start next year. All their profit will go into their savings account for them to earn (they currently both have more money in their accounts than I have in my little personal account!) At the same time we also don't give an allowance directly to them - it goes into their accounts each payday automatically - and since they are only 7 & 9 they don't have access to it as they would blow it in a heart beat.

We have bonds - but honestly I don't see them as future big riches deals as I once did.

I also do a UPROMISE account - which has over $500 in it at this point and I just need to update it so the current credit cards we use for all this farm stuff are included and count and earn them money.

Personally, I'd go with real estate, particularly real estate that can contribute to "paying for itself".

Our 529s are through UPROMISE/VANGUARD also

Yes, but if the grandparent opens it as a non-custodial account they retain control of the assets. To my knowledge most plans will allow the beneficiary of a plan to be changed at the owner's discretion, without age or income restrictions...And assets in the grandparent's age cannot be counted against the minor unless they're a dependent of the grandparent...So theoretically, the grandparent can change the beneficiary to a sibiling of the child, when it is time for the child to apply for financial aid...now there are fewer assets in the child's name...after financial aid has been granted, the grandparent moves the assets back into the original beneficiaries name to use for college.

529 also cover more than just tuition and books, they cover living expenses; which is a limitation of most prepaid plans...For those of you looking into a prepaid plan, consult a tax advisor...I once heard that it is possible for the IRS to tax you on the difference in the value that you pay vs. the value that you receive, but I have not done additional research on it at this point.

Savings bonds can be safe and may double in 10 years, but you might be missing out on any compound interest that other investments offer.

I once heard someone say that 100 years ago an ounce of gold would buy you a nice suit and today an ounce of gold would still buy you a nice suit...It may not grown much, but it can maintain value...Hopefully, the value it maintains will increase proportionally to the amount that the cost of higher-education increases.

My apologies for the long post...Good luck with your decision.

Florida's Prepaid fund offers a room and board package but it is pretty costly and we did not sign up for it. I haven't heard about the possible tax but I will look into it..thanks for the tip. My inlaws did prepaid for my husband's step sister back then it only cost him about 20 bucks every other week...she also got a full scholarship for being such a good student...she was able to use the scholarship money for living expenses. My inlaws were all done paying for college when other parents were just getting started...it made a big impression on me.

I have read alot about gold and silver. Basically a lot of what is said about it is that it has a universal value globally. If the currency of your country loses alot of value or completely tanks stocks, bonds, mutual funds and most other investments will be total loss while the gold and silver will be safe.

My father-in-law set up 529's for both of our kids as soon as they were born. Even if he died tomorrow what is in the account would probably grow enough to cover at least a couple of years of college for each of them.

If you are saving towards a college education, have you looked at the GET program here in Washington? I think it stands for Guaranteed Education Tuition. Basically you purchase "units" of tuition at public or private colleges & some tech schools - at today's price. Then when your child is ready to attend college they can use those units toward the cost of the tuition at that time.

I don't know much more about it but I'm sure you can find something if you do a google search.

We have saved in a couple different accounts. Each child has a 529 account. We also use Upromise. In addition we have set up mutual funds for each child. By the time our children get to be college aged. We will have long paid off our morgage and plan to use the money we would have put to morgage payments to college payments. We will give our children the gift of a college education. They are on their own for graduate school.

Lisa

mutual funds (520 and EIRA) and CDs and stocks (Hershey's as a birth gift)

well, we bought savings bonds for the children last year.... $25 changes to $50 but the maturity rate is now 30 years not 10 years. That shocked me! so if your child is 10 it will start maturing when they are at thier peak income.

oh to answer your question... our childrens inheritance will be in real estate.

Caroline, are you sure?
When I started buying them this year the bank told me 10 years?
30 sounds ridiculous. I'd do CD's if a bond is 30 yrs.
I'm going to call the bank and also read the info on bonds.
Will post what I find out tomorrow.

Morrison, the grandchildren are only 2 and 3 y/o, to soon for savings accounts although they have something here called Uniform gift to minors
something or other where it's in their name and an adult and
the child can't touch it without the adult present until they're 18.

After reading Carolines post I went to the
Savings Bonds web site.
Here is what I found. (Not happy about it and after they reach
five years old I won't be buying anymore., I'm doing this for their college
and to buy a home or something.)

Extension rules for November 1982 through April 1995: Bonds will enter into a first extension for 10 years. On the second extension, the bond earns interest until it reaches 30 years old. During the seconds extension, the guaranteed minimum interest rate value is re-calculated. It begins by determining what the bond will be worth at the end of the first maturity period and then applies the rate that was in effect when the second maturity period was entered for each interest period.

EE BONDS ISSUED SINCE MAY 1995: Since interest rates can change every six months, it is virtually impossible to predict when your bond will reach it’s original maturity (face value). A brief guideline is if the bond was earning an average rate of 5% per year, it would take approximately 14 1/2 years to reach face value. A bond earning interest at a rate of 6%, compounded semi-annually would take no more than 12 years to reach face value.

GOOD NEWS! EFFECTIVE MAY 1, 1995, BONDS ARE GUARANTEED TO BE WORTH AT LEAST IT’S FACE VALUE AT 17 YEARS. THE TREASURY WILL MAKE A ONE TIME ADJUSTMENT TO BE CERTAIN THAT YOUR BOND WILL REACH ITS FACE VALUE IF INTEREST RATES WERE TOO LOW.

Extensions on Bonds issued from May 1995 and thereafter is from the 17th year to 30 years, bonds will earn interest for thirteen more years, or until it is 30 years old.

It's never to soon for savings accounts. Our children have them and we put money each month in them. My parents also give money for college each birthday and Hannakah and into the savings account it goes. great way to teach them savings from an early age.

We also have Uniform gift to minor accounts for each of the children.

Be careful with these accounts...They are not tax-deferred ( or tax-free) accounts and when the child assumes control of the assets they can do whatever they want to with the money...Additionally, all monies placed into this type of account are considered a NONREVOCABLE by the IRS...So any money taken from the account must be used by the child or directly for the child's benefit.