What would be a good financial investment for my son? I was thinking of getting him a CD or something along those lines for when he turns 18. Any ideas?
TIA,
Dan
TIA,
Dan
-
TDR Magazine subscribers receive more than the magazine! You also gain additional forum privileges!
Details here: TDR Privileges
Subscribe to TDR Magazine here: https://www.tdr-online.com/
Financial Investment for my child
- Thread starter ROADWARRIOR
- Start Date
Attention: TDR Forum Junkies To the point: Click this link and check out the Front Page News story(ies) where we are tracking the introduction of the 2025 Ram HD trucks.
Thanks, TDR Staff
How old is your son?? Investments, that is, good investments require lots of time...
My personal advise is to take a Dave Ramsey 14 week course. I am taking one thru our church and its fanstastic. He will set you straight and tell you the truth about investments.
Dave Ramsey says that CDs are nothing more than a lousy interest rate savings account with a certificate that says you deposited money in someone's bank.
His best advise is to invest in Mutual Funds and to be sure that they have been around for at least 5yrs, but 10 is better and check their track record for the last 10yrs. Inflation is approx 4. 2%/yr and taxes on your investment mean you need to find a Mutual Fund that pays at least 6%/yr just to break even. If you can find one that pays 8-10%, go for it...
If your son is 15yrs, then for sure something like a CD is fine, but if your son is 2yrs, then find a nice long term mutual fund.
I'm no expert, but I after taking the course, I feel much more educated.
Good luck.
My personal advise is to take a Dave Ramsey 14 week course. I am taking one thru our church and its fanstastic. He will set you straight and tell you the truth about investments.
Dave Ramsey says that CDs are nothing more than a lousy interest rate savings account with a certificate that says you deposited money in someone's bank.
His best advise is to invest in Mutual Funds and to be sure that they have been around for at least 5yrs, but 10 is better and check their track record for the last 10yrs. Inflation is approx 4. 2%/yr and taxes on your investment mean you need to find a Mutual Fund that pays at least 6%/yr just to break even. If you can find one that pays 8-10%, go for it...
If your son is 15yrs, then for sure something like a CD is fine, but if your son is 2yrs, then find a nice long term mutual fund.
I'm no expert, but I after taking the course, I feel much more educated.
Good luck.
OOPPs, I forgot to mention that next week is the retirement and college savings class. Maybe I'll have something additional to add then.
Thanks,
Louis
Thanks,
Louis
MEby
TDR MEMBER
Right on with the exception that Dave would recommend a money market account over a certificate of depression. (CD)
Glad to see another Dave listner hear. What part of the baby steps are you in right now?
:-laf That's what I was thinking too! I can justify buying additional collector cars to my wife because they are investments
We are getting ready for week 9 (retirement and college savings) of the 14 week course. I love this course. I've been trying to teach my wife for 9yrs of marriage most of the things that Dave teaches, gave up after about year 5 after our first child was born...
She has gone from "free spirit" to logging every nickel we spend and budgeting down to "0" every month. She (and I) have really cut back our bad spending habits too. I just have to sit back and smile
Good thing I bought all of the goodies for our truck before the course or she would be all over me... :-laf
Thank you Dave Ramsey !!
Watch out for college "taxes"
The thing about investments for kids is the impact they have on the Cost of Attendance for college. Simply put,if the kid has savings his own name,they are going to reduce the amount of offered aid by 20% of the assets of the child. They will do this every year that the asset remains unspent--total tax bite=50% !! 529 plans are not much better. 5. 65 % of the plan held in the parent's name is considered an asset "tax",vs. 20% if held by the student. The dirty little secret is the 5. 65% tax is levied on the principal as well as the accrued interest. These facts led one certified college college planner to call 529 college savings plans a "con game". Over a four year life,a 50 thousand dollar savings account in the kid's name will reduce the college aid offered by the school by 10 grand freshman year,$7500. 0 sophomore,$5000. 00 junior,and $7500. 00 senior[not figuring interest during college years] The "tax free" 529 plan is a lot better with a 14. 1% average reduction in college aid that will reduce needs based scholarships and aid by $7087.
Since Dave Ramsey was mentioned here, I wonder what he would think of this idea? Simply take the money you would set aside for your kid and pay down debt with it. Credit card debt would way outperform any mutual fund,and mortgage debt averages about the same return as a 529 plan. The secret to these strategies is they are tax free and allow the student to qualify for the maximum college aid award;your house and paid off consumer debt are not counted as assets when considering college financial aid. If your taxable [wage] income is low enough,you could also be looking at interest free loans for four years,with low interest repayment rates commencing AFTER graduation. We found one such loan for 4. 8% APR, available to anyone.
There are other strategies for children to earn their own assets for college and avoid the college tax,but this post is running a little long. I know of one family who used these strategies and found that an expensive private school was a much better deal than a state college.
The thing about investments for kids is the impact they have on the Cost of Attendance for college. Simply put,if the kid has savings his own name,they are going to reduce the amount of offered aid by 20% of the assets of the child. They will do this every year that the asset remains unspent--total tax bite=50% !! 529 plans are not much better. 5. 65 % of the plan held in the parent's name is considered an asset "tax",vs. 20% if held by the student. The dirty little secret is the 5. 65% tax is levied on the principal as well as the accrued interest. These facts led one certified college college planner to call 529 college savings plans a "con game". Over a four year life,a 50 thousand dollar savings account in the kid's name will reduce the college aid offered by the school by 10 grand freshman year,$7500. 0 sophomore,$5000. 00 junior,and $7500. 00 senior[not figuring interest during college years] The "tax free" 529 plan is a lot better with a 14. 1% average reduction in college aid that will reduce needs based scholarships and aid by $7087.
Since Dave Ramsey was mentioned here, I wonder what he would think of this idea? Simply take the money you would set aside for your kid and pay down debt with it. Credit card debt would way outperform any mutual fund,and mortgage debt averages about the same return as a 529 plan. The secret to these strategies is they are tax free and allow the student to qualify for the maximum college aid award;your house and paid off consumer debt are not counted as assets when considering college financial aid. If your taxable [wage] income is low enough,you could also be looking at interest free loans for four years,with low interest repayment rates commencing AFTER graduation. We found one such loan for 4. 8% APR, available to anyone.
There are other strategies for children to earn their own assets for college and avoid the college tax,but this post is running a little long. I know of one family who used these strategies and found that an expensive private school was a much better deal than a state college.
MEby
TDR MEMBER
This is generally the order that Dave Ramesey recommends.
1: $1,000 In An Emergency Fund
2: Pay Off All Debt With The Debt Snowball (smallest to largest)
3: 3 To 6 Months Expenses In Savings (Finish Emerergency Fund)
4: Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
5: College Funding
6: Pay Off Your Home Early
7: Build Wealth And Give!
edit:
I don't think I have ever heard Dave recommend anyone ever getting student loans to go through college. Pay as you go or saving for it is the only advice I have ever heard from him on his show. If you can't afford to pay for, make the kid work his way through college. A lot of people do it this way including myself. Sure, he won't be in Yale or Havard, but thats not a big deal.
1: $1,000 In An Emergency Fund
2: Pay Off All Debt With The Debt Snowball (smallest to largest)
3: 3 To 6 Months Expenses In Savings (Finish Emerergency Fund)
4: Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
5: College Funding
6: Pay Off Your Home Early
7: Build Wealth And Give!
edit:
I don't think I have ever heard Dave recommend anyone ever getting student loans to go through college. Pay as you go or saving for it is the only advice I have ever heard from him on his show. If you can't afford to pay for, make the kid work his way through college. A lot of people do it this way including myself. Sure, he won't be in Yale or Havard, but thats not a big deal.
Last edited:
My son just turned 1 and I have already wasted a year.
I am not trying to knock Dave Ramsey or his program for being debt free. The only thing I am trying to point out is that money held by the student in his own name is "taxed" by colleges at confiscatory rates. 529 plans may not be the answer either unless the parent saves more in taxes than is taken away in college aid --pretty much applies to high income families. The constant legislation dealing with tax law and 529 broken promises [our state suspended tuition re-imbursement a few years ago] makes these programs a little riskyfor the rest of us. If the kid decides college is not for him or if a kid does not use all the money in a 529, it is a big problem. I know a college student that was fortunate in scholarships,and a 529 was not needed and prooved to be a terrible investment for the family.
Paying down your mortgage is one way to fund college that should be Ramsey-friendly and it does not hurt the student for needs -based scholarships and grants. A second strategy is if the student has earned income [wage income from an employer],100% ofthat income could be invested in a Roth, and the principal could be withdrawn later to pay off college debt. My own daughter earned two grand more than she needed for school,and dumped it in a Roth. By doing so,she kept $400. 00 that would have been lost to higher college cost of attendance. Again,the idea is to avoid having the college financial aid system take away so much of what you have saved up for school.
As for taking on debt for school,I see nothing wrong with borrowing money that is at a rate lower than what you pay for your mortgage. Our family is taking the savings from the 4. 8% interest college loan and using it to further pay down our mortgage. The bottom line is that we will be debt -free sooner this way.
Paying down your mortgage is one way to fund college that should be Ramsey-friendly and it does not hurt the student for needs -based scholarships and grants. A second strategy is if the student has earned income [wage income from an employer],100% ofthat income could be invested in a Roth, and the principal could be withdrawn later to pay off college debt. My own daughter earned two grand more than she needed for school,and dumped it in a Roth. By doing so,she kept $400. 00 that would have been lost to higher college cost of attendance. Again,the idea is to avoid having the college financial aid system take away so much of what you have saved up for school.
As for taking on debt for school,I see nothing wrong with borrowing money that is at a rate lower than what you pay for your mortgage. Our family is taking the savings from the 4. 8% interest college loan and using it to further pay down our mortgage. The bottom line is that we will be debt -free sooner this way.
bighammer
Super Moderator
Another option rather than pre-paying tuition, is a 529 plan. Greater flexibility if college is not a part of their life plan, or your investments do really well and they want to go the $pendy Out of Sight U.
I think each state is a little different, so you'll have to check into the details.
I think each state is a little different, so you'll have to check into the details.
Issue 128 – Digital Version
Digital Magazines
FREE!
TDR Test Drive - Digital Edition
Renew
Subscribe
Gift Subscriptions
Back Issues
Subscription Status
Address Change Form
Buyer's Guides
Ram Diagnostic Trouble Codes
The Perfect Collection
The Perfect Collection Vol. II
TSB Updates
Dodge/Cummins Historical Overview
Cameron Collection
What Makes Us Tick?
Product Showcase
Advertising
Turbo Diesel Register
Issue 128 – Digital Version
Digital Magazines
FREE!
TDR Test Drive - Digital Edition
Renew
Subscribe
Gift Subscriptions
Back Issues
Subscription Status
Address Change Form
Buyer's Guides
Ram Diagnostic Trouble Codes
The Perfect Collection
The Perfect Collection Vol. II
TSB Updates
Dodge/Cummins Historical Overview
Cameron Collection
What Makes Us Tick?
Product Showcase
Advertising
