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Investment ideas for kids?

Started by Faith2014, November 13, 2018, 11:55:56 AM

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I've been putting money aside for my 3 nephews for a couple of years and would like to start investing it.  Hopefully I can enlist them as well - my family has been financially unsophisticated / unwise over the decades and I'd like to be a positive role model.  Giving them some money to start life off with is my main goal as well as giving them a different perspective on life and money.  I grew up hearing that people on in debt their entire lives and die that way too.  Very self-defeating.

The investments will be held in my name - the way things are going, they will get need-based money for college, and I don't want to put anything in their name to possibly risk that.  I'm virtually the sole support for my sister and her 3 sons.  She gets a little over $650/month in child support due to her ex's hidden cash income.  Oh well.  I'd be in a much better spot financially if this wasn't the case, but life happens and I prefer to focus on their future rather than bemoan the state of affairs.

On different forums, I've seen advice stating to buy them a kids' oriented stock and re-invest the dividends.  Others suggest a mutual fund  (VTSMX for example) because the stock could go south. 


As background, the boys are 10, 8 and 8.  I'm 52, she's 42.  I have a term life for the next 7-8 years for their support in case something happens to me.  I'm not married, and my house should be paid off in 7-8 years.  My investments are all in 401K, IRA (Vanguard) and a self-directed IRA (real estate).  I'm above the median for retirement and net worth, but not at Sam's 'above average' level due to life.



You should 100% be looking at simple index funds just like VTSMX.  My advice would be VOO or a split between VOO and VB to have exposure to both small cap (smaller companies) and large cap (large companies).  Super low fees and simple.  Do not overthink it.  A simple low fee index fund like VOO is all you need.

HOWEVER.  Keep in mind that they could hit the age of starting life off and the markets could be south.  In which case, you would want to delay pulling the money out until the markets recover.  That is the risk of investing.

If you do not want that risk, then you may want to consider a simple CD with the bank.


Currently it appears that assets in a 529 plan owned by a grandparent or other relative are not included on the FAFSA.  That means that it shouldn't impact needs based

Under the CSS Profile it would be counted and would impact any aid.  Most schools do

My recommendation is that you establish a living trust and talk to the financial planner and estate lawyer on strategies to achieve what you want should something happen.  Who you name as a beneficiary for your retirement accounts may impact the withdrawal timeframe and the RMD.

In another post I mentioned family LLCs.  That is likely massive overkill for what you want but it's my hope for teaching my own kids as well as act an asset protection mechanism.

As far as investments go you can look at some target date funds for each kid...just make sure the fees aren't silly but it's pretty easy...just not optimal...


At those ages, I'd buy a limited pay life policy (you own it ) on each.  It will build cash value, and be something you can allow them to borrow against for needs they have in the future.  Not everyone does college.  Even at guaranteed rates,  in 10 years they will have an asset to use if needed and an opportunity to purchase additional life insurance if they want. (with no medical qualifying)   We did that for each of our nieces and nephews.  Death benefit and an asset that can be borrowed against when needed, with no credit hit. With their mother's situation, a conservative solution might be the best one.  Then a more participatory savings account, and then some investment training as they learn about risk.