Late Morn'in Coffee,
The young one's and learning more about investing; with their skin in the game. Okay, it may not be all of "their" money, but some portion of the total.
A few thinking notes:
--- We are aware of the IRS code regarding taxation of a minor acct. at the parents rate, etc.
--- A straight forward checking/share draft acct. at a bank/CU would be part of an overall plan. The minor could park monies in these accts. from birthday or chores monies. This money would be noted to the child as the "emergency money" acct. Obviously, the acct. balance would also be used for the purchase of items desired by the child; after the mandatory "wants and needs" discussion. Although these accts. don't produce income (for the low dollar balance totals), the emergency fund learning is the primary focus with this.
--- A real fund acct. established with whatever minimum dollars may be required by a given vendor. Again, a discusssion/learning situation would exist as to the "why" of a particular fund investment.
--- A test portfolio (no real skin in the game) could also be established to view the actions of fund choices, too.
--- If a 529 college acct. is in place, this could also be used to track its investment mix. The downside with this is the limited flexibility to move monies for the full benefit of a positive return. But, this is also another area for a learning tool.
Anyone with experiences using minor accts. ,willing to share the in/outs of this area; are thanked in advance.
Regards,
Catch
Comments
Yup, we did minor acc'ts starting when the kids were about 12 - all IRA's. Later, when Roths came about, we converted for them at the kids' low tax rate. We usually picked funds that had recognizable companies in their portfolios, looking for the Disney's and Mickey D's etc.
Now, as for 529's: We have accounts for our grandchildren, knowing full well that a change of allocation can only be done ONCE a YEAR, for some stupid reason. The rules are so broad in other respects...and we decided to use one particular rule: that you can change beneficiaries any time you like with no penalty, and as many times in a year as you like. So, my grown nephew is a "beneficiary" of mine (I own the accounts, of course) and a small sum just sits there. If I am somehow smart enough to see the next train wreck coming, I will switch my g'kids accounts over to him and avoid a meltdown disaster. Nephew's account is in a money market.
Some brokerages are more amenable to 'benny' changes than others. Scottrade probably doesn't give a hoot; Vanguard would snarl after 2 or 3 a year I bet.
FWIW, and,um, no, I haven't used this escape hatch yet.
best, hawk
Nice to see your name upon the electronic pages here.
Thank you for your thoughts.
Can't do a minor IRA at this time, due to no reportable income.
We have discussed the silly rule with the 529's previous, so..........
We have set upon a slightly different mode using the existing 529; to help offset the "1" portfolio change per year rule.
Maintaining the acct. with monthly electronic transfers from a bank acct. two times each month; a type of dollar cost averaging, which has been in place since the acct. was opened. But, we have reduced the bi-monthly amount; and then....a slightly dangerous proposition........when we find a market pull back; we transfer a large amount to the 529. The time frame for posting the monies to the account is usually two days.
We did this late last year (2011) and again around the middle of January this year.
So far, the plan is working to a positive benefit.
Take care of you and yours,
Catch