I want to start some type of an account for my five year old son to have when he gets older. What kind is best

Should I invest in a mutual fund or should I buy bonds or just a plain old savings account? I would like for him to have a good amount of money for him by the time he turns 18. I would invest at least $50-$100 or more monthly.
I want to start some type of an account for my five year old son to have when he gets older. What kind is best
Consider a 529 College Savings account. Each one is different but under most circumstances it should be deductible on your taxes.





I looked at a college calculator right after my first son was born and with a moderate rate of return and choosing a public state school, the calculator indicated I would have to save $141 a month for 18 years! Yes, from the time he's born to 18! It's even higher if you start at 5 or if you want your child to go to a private school like Stanford, Harvard or Princeton.
Reply:Well... a "plain old saving account' isn't going cut it. The banks invest your money in mutual funds, then only give you 3% interest. So if your not a seasoned investor like myself, then mutual funds and bonds are your best bets. Mutual funds basically are money managers who take out a % of the interest (not as much as the bank) for managing your account, and give you the rest. When mutual fund share prices are low you have the opportunity to buy more shares, and when they go up in price you leverage your money. Get in touch with a licensed securities mutual fund agent, and they can help you find the best performing mutual funds.
Reply:Consider a 529 savings plan to fund his college education.


http://www.savingforcollege.com/intro_to...


It's more important to take care of his education than to provide him with fun money.
Reply:If you plan to apply for financial aid for your child if he goes to college, save the money in your name rather in your child's name. Colleges expect a much greater percentage of the money in your child's name, 35 percent, to be used annually for college costs than the money in your name, 6 percent. If you want to save for your child's college bill without outside help, investing in your kid's name can save you money in taxes. You have a couple of options.





Your first option would be to save the money yourself in your own account or use your home equity to pay for your child's college education. Of course, the drawback is your going to pay higher taxes for all the money your saving in your savings account and equity in home should be used for emergencies only.





Your second option would be a traditional custodial account. You control the account until the child reaches the age of 18 or 21 depending on your state. Until the age of 14, the first $800 dollars of interest and dividend income is tax free, the next $800 is taxed at 10%. Anything above $1,600 is taxed at the parent's marginal tax rate. After age 14, all income generated by investments in your child's name is taxed at your child's rate, which is a low tax rate, until 18 or 21. Great idea, even if he doesn't go to college, for he/she would have a footing when he/she leaves home.





Another plan, which follows the same idea as the custodial plan above is an ESA, Education Savings Account. This would be great if your not going to apply for any type of financial aid. You can put up to $2,000 per year, per child. When withdrawn, if it is used for college, the earnings are not taxed.





Last but not least, there is the Section 529 plan, the state sponsered college savings plan. You can put into it more then $200,000 per child into one of these plans. As long as it's used for college, the great thing about it also, is that it's not taxed at all. It can also be used for graduate school expenses too. Unlike the custodial account, it must be used for college only. If it's not, the withdrawal of the money is taxed and a 10% penalty is added. Also, if you would try and get financial aid for your child, this plan would greatly diminish their financial aid eligibility.





These plans have pros and cons. These plans make sense for parents to establish their children who don't qualify for financial aid.
Reply:Well you could set up a custodial savings account for him. No transactions would be able to be made without you being present. I would check out the Certificate of deposit rates in your area, it might give you an opportunity to earn a little extra cash with a better interest rate. There's also something called a 529 plan. Its a college savings plan, if you plan on sending him to college, it might be ideal to start saving now. Check the different financial institutions in your area and compare rates. Good Luck!
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