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Old 05-27-2015, 01:28 AM   #1 (permalink)
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Investing, for education?

Ok, like many folks when it comes to investing I don't have a clue. So, I would like to pose a question in regards to saving/investing for a child's education. I know there are several different ways to go about it, for example my wifes dad put money away into one of those college savings programs in FL.

So, my children are currently seven, five, and almost 18 months. Given that they are different ages, they'll obviously require different procedures for reaching a certain savings goal if I were to set it at a certain number.

Assuming I had let's say, $10k for each of them right now. Would it be best to just put those funds into an interest bearing account, some kind of trust fund, bonds, an IRA, one of those college savings programs?

I'm not even assuming all three of them will go to a University however, I want to be able to provide the option should they choose to do so.
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Old 05-27-2015, 02:56 AM   #2 (permalink)
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I too am interested as I have been contemplating the same with my five year old and five month old sons. I am by no means "living lavishly" but I do have the means to put some money back for my two boys and their education. I know whenever I was born my grandfather started a $10,000 CD with a 5% interest rate. By the time I graduated it had grown to well over $30,000. I'm not up on all of the investing as of to date and I don't believe CDs are as "valuable" or as commonly used as they were in 1984 but I could be wrong. Some insight would be nice and I don't have anywhere near $10,000 at hand to put forth for my two sons a piece but I know something is better than nothing and now is better than later. Thanks.
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Old 05-27-2015, 08:05 AM   #3 (permalink)
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You are investing with a fairly longterm horizon. Because you are investing over 15 years, I would suggest putting the money in the stock market, and the safest way to do that is with an index fund. You could buy an index fund that tracks the us or global market, and you should expect to make an average of 7% per year. There will be years that it goes down, but it should even out over 15 years. I would also lump all the money together and divide it up when they go to college.
If you could get a 5% CD today, you should take it.
Generally, you pay taxes on the "capital gains" of the investment. I wonder if there is a special type of account that works as a tax shelter for education. That would be a good thing to find out.
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Old 05-27-2015, 08:12 AM   #4 (permalink)
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I wonder if there is a special type of account that works as a tax shelter for education. That would be a good thing to find out.
Some states have a 529 plan, which allows capital gains to be tax free!
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Old 05-27-2015, 08:27 AM   #5 (permalink)
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Some states have a 529 plan, which allows capital gains to be tax free!
This. There could also be state tax benefits when you contribute to a 529 plan. Also, others can contribute to your kids' plans.

I live in VA and have a 529 plan set up for both my kids. You are smart to do it when they're young so you have time on your side.
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Old 05-27-2015, 08:46 AM   #6 (permalink)
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Speak to an investment rep, CD's pay next to nothing, most 5 yr CDs will be below 2%. You need to be in the market. I would pick a large cap mutual fund or a balanced fund. American Funds has several large cap mutual funds that are very good and a very good balanced fund. The market rarely loses money in 5 yr time frames. Realize you could lose money in the market, but over the long term, that is where the growth is.

If you are savvy, pick a couple of large cap growth stocks...you will need to watch them on a daily basis.
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Old 05-27-2015, 11:54 PM   #7 (permalink)
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I have an appointment to speak with a rep Friday. I'm really not interested in going to CD route. I am looking into some large cap growth stocks right now.
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Old 05-28-2015, 12:10 AM   #8 (permalink)
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I have an appointment to speak with a rep Friday. I'm really not interested in going to CD route. I am looking into some large cap growth stocks right now.
Good Luck...let us know what you decide. If you go with American Funds, I would consider:

Income of America --diversified and performed well in the downturn
Fundamental Investors
AMCAP
American Mutual

Avoid bond funds...if rates rise, bond prices drop....my take is that the immediate future will be a lower growth environment, a lot of large caps pay good dividends, and are buying back shares at a decent pace. If rates do rise, in the short term, stocks will drop, but rebound.

Disclosure: I am not responsible for your decisions and not a liscenced rep.
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Old 05-28-2015, 02:43 PM   #9 (permalink)
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Quote:
Originally Posted by travis1581 View Post
Some states have a 529 plan, which allows capital gains to be tax free!
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Originally Posted by tigar19 View Post
This. There could also be state tax benefits when you contribute to a 529 plan. Also, others can contribute to your kids' plans.

I live in VA and have a 529 plan set up for both my kids. You are smart to do it when they're young so you have time on your side.
The 529 style plan is what my FIL did with my wife and her sister. I know they're different depending on state and can have some penalties, etc. So they may not always be the best option.

Stocks scare me, especially those that have to be watched constantly. Frankly, I don't have the time to properly monitor those.
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