Author Topic: Vanguard for a minor?  (Read 924 times)

Harper

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Vanguard for a minor?
« on: September 02, 2018, 12:49:29 PM »
Hi

My son is 13yo and quite the saver. He has 1K that he’d like to put in mutual fund. What’s the best way to do this without affecting financial aid/etc.

Thanks!

sol

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Re: Vanguard for a minor?
« Reply #1 on: September 02, 2018, 12:54:07 PM »
If he has earned income (and has thus paid FICA taxes), putting it into a Roth IRA would shield it from financial aid assessments.

If he doesn't have earned income, and he's just been saving gifts like birthday money, then the options are more limited. 

Trifele

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Re: Vanguard for a minor?
« Reply #2 on: September 02, 2018, 01:02:19 PM »
Agree -- Roth IRA is the way to go if he has earned income. I believe those are non-reportable for financial aid purposes.

If you can't do an IRA, then your next best choice is probably a custodial account. 

Vanguard has some funds (Target Retirement and Star) that have the $1000 minimum, but the rest have $3000/$10,000 minimums.  Vanguard does not cut custodial accounts any slack on the minimums -- it's still $1k/$3k/$10k.  Schwab does -- you can do a custodial account there and get into any of their index funds with $100.  Their index funds also have nice low fees -- many in the .03 - .04% range.  Not sure about Fidelity and their minor funds.
« Last Edit: September 03, 2018, 03:38:09 AM by Trifele »

MDM

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Re: Vanguard for a minor?
« Reply #3 on: September 02, 2018, 02:20:17 PM »
...you can do a custodial account there....
"Custodial" is the magic word that unlocks lower minimums at most of the usually recommended places: Fidelity, Schwab, Vanguard, etc.

See http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child's-roth-ira-with-very-low-income for related discussion.

mozar

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Re: Vanguard for a minor?
« Reply #4 on: September 02, 2018, 05:39:38 PM »
I went with Shwab custodial account for my sister. I think I went with a total stock index mutual fund.

Harper

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Re: Vanguard for a minor?
« Reply #5 on: September 04, 2018, 06:11:03 AM »
Thank you for your replies.

The cash is birthday money, etc so no IRA yet.  So it looks like I will do a custodial account.  I will take the hit on the taxes but it will roll to him once he's 18? 

Trifele

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Re: Vanguard for a minor?
« Reply #6 on: September 04, 2018, 06:52:04 AM »
Thank you for your replies.

The cash is birthday money, etc so no IRA yet.  So it looks like I will do a custodial account.  I will take the hit on the taxes but it will roll to him once he's 18?

It depends on the type of account and the state you are in -- https://www.thebalance.com/beginners-guide-to-ugma-and-utma-custodial-accounts-4060475