The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: GoStumpy on December 21, 2015, 11:14:58 PM
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We just rolled up our 18 month old's piggy banks that have been funded by my change over the last 18 months, and it added up to $133!
Combine that with neighbours / grandparents that want to help out with cash donations towards his 'college fund' or the like, I really would like to know my options and what positives and negatives are with each.
Firstly, I am not *green* to investing, I've done more research than I've done investing though... always been broke (my own fault). I know the concept of risk, and I am not the least bit frightened of it. I am currently 30.
My wife wants to make an appointment with the Bank to go over our options, so I'd love to have an idea first of what other options I have.
Personally, I want to invest it in a TFSA under one of our names, and do research on what would be some index funds to allocate it towards and just plunk money in there until it grows big enough to really diversify.
Wife sounds like she really wants to go with RESP or something like that, she keeps telling me "They really have some good ones for kids you know!" like I don't know how to invest :(
Thoughts? Questions?
I think we'll be putting somewhere around $1000/year into this for the first few years...
Thanks!
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I suppose I should be checking for government grants / etc that would match or benefit us saving into an RESP?
I like the idea of saving for them to use however necessary, and hopefully they won't need it and we can turn it into their retirement fund started at a young age like I wish I did!
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My wife wants to make an appointment with the Bank to go over our options.
I think we'll be putting somewhere around $1000/year into this for the first few years...
No. Definitely don't to a bank employee or any other salesman (broker, etc). They have NO fiduciary duty to you. Legally they work for the bank -- not you. So they will try to sell you high commission products that leech away at your returns. Free advice is always the most expensive advice you will ever get.
A child has a time horizon of what? 18 years maybe? You want to be heavily invested in the stock market. Just buy a total stock market index fund (like VTI) through E Trade, AmeriTrade or Vanguard. If you're afraid of the stock market, which you should NOT be because of the 18 year time horizon, then diversify more into a total bond market index fund like AGG.
Since it costs $10 per trade then I'd invest once your have at least $1,000. That makes it a 1% commission.
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I'm buying funds for my 2 year old son for 5000 icelandic kronur each month and I'm going to move the money into a foreign index fund as soon as we in Iceland can actually invest our money outside our country.
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Personally, I want to invest it in a TFSA under one of our names, and do research on what would be some index funds to allocate it towards and just plunk money in there until it grows big enough to really diversify.
Wife sounds like she really wants to go with RESP or something like that, she keeps telling me "They really have some good ones for kids you know!" like I don't know how to invest :(
RESPs get a match from the government (or at least they used to). There must be some of them that don't suck and let you put the money in the allocation you want. A match would have to be pretty bad for you to go for a TFSA instead. And you'll want that TFSA room for yourself pretty soon.
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We are doing 529s and as our daughter gets a little older (4 months right now) I will probably work with her to understand how businesses work, how they make money, what their competitive advantage may be, etc. and help her pick individual stocks. I'm less worried about her "making money" and more concerned that she learns why investing works and that you own a company and should care how and why it makes its money. I think the value of that skillset goes far beyond simple investing. It builds an analytical and strategic mindset far too few people have this day and age.
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Paul has an interesting take on it below. Not exactly used for college and probably hard to have them not touch it as they get older but it could work.
http://paulmerriman.com/turn-3000-50-million/
http://paulmerriman.com/podcast-how-to-turn-3000-50-million/
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I would do the RESP over the TFSA. Where else can you make 20% on your investment.
If you put in $1000 the government will give you $200. (Max of $250/year)
Some provinces even top up more at certain age milestones.
I would put the money in before the end of the year.
If you don't know what to "invest" in yet just get a high interest savings account and figure it out in the next few months.
Do Not let your bank sell you high fee mutual funds.
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Wait until you've got the min buy in then do Vanguard 500. It's what I've been invested in since I was 4--and it's how I went to college (with minimum investment by my parents).
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This might seem crazy, but for me my child's funds fall under the umbrella of "very long term" investing. My long term investments are Extremely aggressive... 1/3 VWO (emerging markets) 1/3 VBR (small cap value) 1/3 VNQ (REIT). Rebalanced annually this translates to enormous expected growth. Of course that's based on back-checked data. YMMV
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http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/cesp-pcee/csg-eng.html. We have 2 little ones and I deposit $2,500 per kid (maximum that the government bases the basic grant on) at the beginning of each year to an RESP account I set up at TD Direct Invest (formerly TD Waterhouse). I just made the contributions this past weekend for this year and expect the 20% government grant to be automatically deposited ($500 per kid) to the account within a month. All the banks have these accounts- just go with wherever you already have your self directed investment accounts. We chose stocks and ETFs that we think will be interesting for them to learn about later- in there today we have DIS, MCD, GURU, TD.TO, CUD.TO. The gov grant is free money so definitely max that out before putting anything for kids education in TFSA!
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http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/cesp-pcee/csg-eng.html. We have 2 little ones and I deposit $2,500 per kid (maximum that the government bases the basic grant on) at the beginning of each year to an RESP account I set up at TD Direct Invest (formerly TD Waterhouse). I just made the contributions this past weekend for this year and expect the 20% government grant to be automatically deposited ($500 per kid) to the account within a month. All the banks have these accounts- just go with wherever you already have your self directed investment accounts. We chose stocks and ETFs that we think will be interesting for them to learn about later- in there today we have DIS, MCD, GURU, TD.TO, CUD.TO. The gov grant is free money so definitely max that out before putting anything for kids education in TFSA!