How can I make my son rich?
I have $5,000 to invest for my 2 year old son this year. I will be contributing another 5k/year on out. I can not open a Roth IRA for him since he is not earning any income. I don't want to pay taxes on the earned interest, nor do I want to receive only 5% from typical CDs, etc. Still, I want the investment to be relatively risk free. I don't expect him to cash out on it until he is retired. Any ideas? Thank you in advance Wow, thank you for the great answers. I even love the tongue-in-cheek responses. I can't pick a "best" answer, because I am going to combine the advice by - taking more taxes and risk and investing the initial money in a no-load mutual fund. I will reinvest it when he has accumulated enough for a 30% down payment + management expenses on a rental property, and repeat that method several times. With remainder money, I will invest him in Index Funds and CDs and even a few individual stocks. I will seek more advice regarding Charitable Remainder Trusts, as I don't fully understand them yet. Also, I should have mentioned this is separate money from his 529 plan, which his Dad funds weekly and friends and extended family contribute to via UPromise. Thanks again!
Public Comments
- send him to boarding school.
- marry him off to a rich girl.
- 529 plan's are good.
- First I would make sure he has one of those prepaid college funds (education is the best investment, what if you lose the 5K or die, etc - at least his education would be paid for)... Then I would look at investing in low-risk stocks... Another option is real estate... yes the bubble burst -- but people always need houses... it's a minimal risk long-term - especially in a relatively expensive area with good schools.. and if his education is paid for and you buy something now when the market is stagnent - you could rent it out for 16 years (condos or vacation properties are good) instead of flipping it - or flip it in a few years when the market bounces back.. All investments carry some risk... and even if the market is awful in years to come - at least you'll know he'll have a future home - at today's prices.
- Municipal (tax free) bonds
- Invest it in ge or mcd stock and let it sit. Make him the benificiary. It may not make him wealthy but it should grow grow grow.
- get a life insurance policy for urself...when u go bye bye he'll be rich but before u go bye-bye...teach him how to be financially responsible so he doesnt blow tht money on girls or fancy cars!! or a more practical solution would be to get a good mutual fund or an income mutual fund
- Place the amount in Mutual Funds.They give u good returns.U mite never knw he ll turn out to be a millionare in thirty yrs.Thats what v do down n india.Contact ur bank for SIP (Systematic Investment Planning) or other brokers
- Pay the taxes. He's in a cheap tax bracket. Is it better to make 5% from municipal bonds (no local taxes), or 18% from Exxon-Mobil and pay 15 cents in taxes on each dollar you earn? You do the math. Also, look up the Rule of 72 to see how an improved return more than makes up for taxes you pay. Also, if you don't expect him to take it out until he's retired, you should see a lawyer about creating a trust, because if it's in his name, he can take it when he's 18.
- You'll want to put cash into some sort of a college savings plan for him. You may also want to invest the stock in mutual funds or ETFs that track the stock market (for example SPY or IVV). On average you'll make more than other asset types, and because the investment is passive (ie he doesn't need to cash it in at any point) you won't be taxed on anything (except for the dividends, but you shouldn't make enough dividend income to be taxed for a long time anyway.) Good luck!
- You ask for risk free. That brings you back to a savings account. Two things to keep in mind; The greater the risk.... the higher the return. A young child with a 40-60 year "time horizon" should take on more "risk" than a 60 year old. The most tax effective way might be a basket of ETF's, properly allocated. Asking for that type of information from strangers, whose qualifications and motives can't be known.... is nuts! Take a year... read a couple of books on retirement investing. It will be worth the time and effort!
- Make sure he has a good education & can take advantage of his strengths, let him earn all the money he needs & learn its value for himself.
- Give a man a fish and you feed him for a day. Teach a man how to fish and you potentially feed him for a life time. Take less than half of that $5000 and enroll in the on-line course at Investools.com. Take your spouse too, it's two for the price of one. You could literally triple that money before your boy starts school.
- Find a good estate attorney and asked him about setting up a "Charitable Remainder Trust". In this vehicle, you are essentially giving away the money while protecting it from the tax man. When your son is older he will be able to be paid a very good salary from managing the trust assets. There is a point in time when these specific funds may leave the family's control. By the time that that happens the balance of your son's estate should be in the millions anyway (assuming that you can teach him the values and habits associated with investing.
