Author Topic: Daughter's Savings  (Read 9501 times)

redfreddie3

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Daughter's Savings
« on: August 30, 2014, 04:43:59 PM »
First posting so please be gentle.  My six year old daughter has saved $1,000 and I would like to help her make the most of her savings.  I would estimate that she would not need the money for at least ten more years, probably even longer.  She rarely spends any money and wants for very little.  She is the kid that can go to a toy store look around for an hour and be fine with buying nothing.  She knows how to use the library and nature for entertainment.  She will probably make deposits monthly, but the deposits range greatly, some months $20 and others $100 plus.  Any advice would be appreciated.

dividendman

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Re: Daughter's Savings
« Reply #1 on: August 30, 2014, 04:48:24 PM »
Can six year olds get investment accounts? If so.... buy some VTI with it and teach her about index funds and compounding... I wish someone did that with me... she might also enjoy the quarterly dividends/disbursements!

mustachianteacher

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Re: Daughter's Savings
« Reply #2 on: August 30, 2014, 04:49:08 PM »
What about using some of the money to buy stock in a company she is familiar with? You could use your own brokerage account to hold the investment (just to keep it a little simpler for you) and do some teaching along the way about how the stock market works.

boarder42

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Re: Daughter's Savings
« Reply #3 on: August 30, 2014, 04:59:02 PM »
Just open a custodial account in her name you will have to be on it though

Pooperman

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Re: Daughter's Savings
« Reply #4 on: August 30, 2014, 05:04:47 PM »
Just open a custodial account in her name you will have to be on it though

I second that. Invest it in VTI and VXUS. She will thank you in 10 years when it's $2,500 instead of $1,000. As she invests more, you can add more shares so it grows and grows. She sounds like she has her life together. I hope bad influences from others as she grows up don't change what is good about how she handles money.

johnny847

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Re: Daughter's Savings
« Reply #5 on: August 30, 2014, 06:15:02 PM »
If this money is coming from a 1099, such as modeling income, then she could open a Roth IRA and contribute her earnings.

If not, a taxable account using VTI is probably best.

wtjbatman

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Re: Daughter's Savings
« Reply #6 on: August 30, 2014, 06:43:46 PM »
She sounds like she has her life together.

She's six.

redfreddie3

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Re: Daughter's Savings
« Reply #7 on: August 30, 2014, 08:00:11 PM »
She makes pretty good decisions for her age.  We try to help her learn good money skills.  She understands needs vs wants.  She loves watching her money grow.  I'm going to talk to her about the VTI.  I think she will be excited.  I promised her I would look around for a good place for her money.  Her money isn't from a 1099.  She banks her gifts, earnings from extra chores, and any of her vacation budget she does not spend.  She wants to start a juice stand/library but so far she has been shut down by unsupportive parents.

neophyte

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Re: Daughter's Savings
« Reply #8 on: August 30, 2014, 08:28:56 PM »
She sounds like she has her life together.

She's six.

I don't know about you, but I had my life together when I was six.

Then I had to go to school and everything started going downhill.


OP, it's amazing you can have a conversation about investing with your daughter when she's this young. I wish my parents had talked about it with me.  I would leave a fair in her bank account though, maybe $100-200, so it doesn't feel like all the money is gone if she looks at her bank balance.

redfreddie3

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Re: Daughter's Savings
« Reply #9 on: August 30, 2014, 08:52:27 PM »
This is the first investing conversation we have had with her.  Mostly so far it has been just regular savings and asking intelligent questions before making purchases.  She has a pretty good thought process down.  She will go to the store and look at the newest dolls and admire them for a while until she gets her fill and then she is cool to go home without.  Heaven help the person who rushes her during shopping, she will still not buy anything but will let you know she WILL look again next time and that she was very disappointed.  We have to make Christmas lists months in advance and so far this year the list includes a red lipstick, gum, money, three litters of kittens or a new puppy.  The animals are not happening as she already has pets.  Most of one side of the family will just go cash and the other side will do a mix.  I will recommend she leaves at least $50 in her local account but to tell the truth she hasn't ever even asked to make a withdrawal.  She was worried the bank would keep all her money when it was first opened but she was good once we explained how the account worked.  She gets excited about the deposit slips so I will need to review her account with her but she shouldn't panic with a small regular bank balance when she has something fancier.

thedayisbrave

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Re: Daughter's Savings
« Reply #10 on: August 30, 2014, 08:58:02 PM »
We have to make Christmas lists months in advance and so far this year the list includes a red lipstick, gum, money, three litters of kittens or a new puppy. 

Hahaha! She sounds PRECIOUS.  Congrats on her money savviness, and THANK YOU for teaching your child about the importance of money.  My mom did the same with me (though I was considerably older than 6) but it was single handedley the greatest gift she could have given me.

redfreddie3

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Re: Daughter's Savings
« Reply #11 on: August 30, 2014, 09:04:38 PM »
She really is awesome, we have to be careful to maintain a serious face when she is going through the important stuff.  I'm trying to put her on a better path thenwhere I started from.  We aren't great with money yet but we are improving and it's hard to unlearn bad habits.  Plus I figure her youth gives her an advantage to grow money when she doesn't need it for living.

gildedbutterfly

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Re: Daughter's Savings
« Reply #12 on: August 30, 2014, 09:13:53 PM »
First off, as others have said, congratulations. Great kids don't just drop from the sky; clearly, you're doing something right as a parent! Keep up the good work.

Re: investing, you might consider investing the money in your name, but keeping it separate from your investments. If you put it in a custodial account, it could affect her financial aid eligibility when she goes to college in ~12 years, since it will be counted as one of her assets vs. one of yours. (A child's assets are weighed heavier than a parent's in figuring aid eligibility.)

gildedbutterfly

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Re: Daughter's Savings
« Reply #13 on: August 30, 2014, 09:15:15 PM »
(The above assumes you live in the US.)

redfreddie3

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Re: Daughter's Savings
« Reply #14 on: August 30, 2014, 09:19:54 PM »
Thank you.  I appreciate the compliments and the advice.  We are in the US so I will have to look at options for ownership of the account.  I don't want her to get shafted later because she was responsible now. 

Pooperman

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Re: Daughter's Savings
« Reply #15 on: August 30, 2014, 09:22:59 PM »
Custodial accounts can be transferred completely into her name at 18. I had one under fidelity growing up. No funds cause too poor and ETFs didn't exist yet. Still, a great learning experience.

redfreddie3

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Re: Daughter's Savings
« Reply #16 on: November 25, 2014, 09:39:56 AM »
Just wanted to post an update. We opened an account at Vanguard in September and initially bought 10 shares VTI.  Since that time the piggy bank has been emptied an additional time and we bought 2 additional shares.  As of today its showing returns of $71.16.  We are all excited about her growth.  When we asked about what she wanted for Christmas/December birthday her list was crazy small and she told us she didn't "need" anything so we should see another jump in the account at the end of December.  Huge thank you to everyone for recommendations.  We appreciate the advice.

surfhb

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Re: Daughter's Savings
« Reply #17 on: November 25, 2014, 10:03:57 AM »
This thread is great! 

I think there's a little brainwashing needed as parents.   For example, I was always told there's another 4 years of school after you go to high school.   In never occurred to me that I would not attend college.   

Keep it up!

FLBiker

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Re: Daughter's Savings
« Reply #18 on: November 25, 2014, 10:13:29 AM »
I don't know about you, but I had my life together when I was six.

Then I had to go to school and everything started going downhill.

A lot of truth in this...

Pooperman

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Re: Daughter's Savings
« Reply #19 on: November 25, 2014, 10:19:27 AM »
I don't know about you, but I had my life together when I was six.

Then I had to go to school and everything started going downhill.

A lot of truth in this...

Puberty's a bitch ain't it? You go from having your shit together to chasing members of the opposite sex and otherwise having copious amounts of hormones ruin your ability to think clearly for nearly a decade.

marty998

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Re: Daughter's Savings
« Reply #20 on: November 25, 2014, 01:47:58 PM »
I don't know about you, but I had my life together when I was six.

Then I had to go to school and everything started going downhill.

A lot of truth in this...

Puberty's a bitch ain't it? You go from having your shit together to chasing members of the opposite sex and otherwise having copious amounts of hormones ruin your ability to think clearly for nearly a decade.

Reminds me of this old chestnut:

We're all born naked, wet and hungry. Then things get worse.



randommadness

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Re: Daughter's Savings
« Reply #21 on: November 25, 2014, 02:34:00 PM »
This thread is great! 

I think there's a little brainwashing needed as parents.   For example, I was always told there's another 4 years of school after you go to high school.   In never occurred to me that I would not attend college.   

Keep it up!

I had that. Yeah man, you can do whatever you want, right after college.

mozar

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Re: Daughter's Savings
« Reply #22 on: November 25, 2014, 05:59:12 PM »
You might need to have a chat about the fact that markets go down sometimes, and diversification.
I don't think 2k will matter too much on the FAFSA.
I would strongly encourage her to start her own business. Being that there is resistance from other parents is the perfect moment to teach her not to listen to naysayers.
Teach her how to run a real business (and about failure too), and she'll get a full scholarship to college.