Rocketman95's consolidation loan thread got me thinking about how to invest money for my son. He's two right now, and I started investing $50 a month into US Patriot bonds when he turned two. I intend to add another $50 every year to this monthly. Patriot bonds mature and double in value at 6-10 years. His savings goes up by $600 every year on top of what is already being invested. For example, for the first year @50.00 per month, his first year of saving is $600.00, which should mature to $1200 when he is 12. for the second year, I will add another $50.00 per month which will total $100.00 per month. The second year of savings will be for $1200 and will mature to $2400 when he is 13. This will continue until he is 7 years old. That will give the bonds time to mature until he is 18. The number will look like this: 2 yrs old--$600.00 matures to $1200 3 yrs old--$1200.00 matures to $2400 4 yrs old--$1800.00 matures to $3600 5 yrs old--$2400.00 matures to $4800 6 yrs old--$3000.00 matures to $6000 7 yrs old--$3600.00 matures to $7200 Adding all the matured rates up, he should have $25,200 in matured bonds. The amount I put away will continue at the same rate. 8 yrs old--$4200 9 yrs old--$4800 10 yrs old--$5400 11 yrs old--$6000 12 yrs old--$6600 13 yrs old--$7200 14 yrs old--$7800 15 yrs old--$8400 16 yrs old--$9000 17 yrs old--$9600 18 gets a nice gift!!! These add up to $69,000. The grand total will be $94,200. I still need to figure out how to reinvest the available money best, but he will not know about this little stash. I will probably keep about $10,000 liquid for any emergencies that may arise. The other can be used for a car, wedding, honeymoon, closing costs on a home, those things that we wish someone had been able to help us with. I'm not putting away for his college because his mother has started up a Texas Tommorow Fund for him. Does anybody have any similar plans in place? When the bonds mature, how should I reinvest the money?
We need more details on the bonds to evaluate this. Do they double in value in 6 years or in 10? Be more specific. At first glance, this looks like an overly conservative plan.
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The way the banker explained it to me was that the bond would mature anywhere between 6-10 years. I was wary of that as well, but am playing it safe on maturity date. I am very new to investing, but am definitely looking for the safest way to get a high return. I've read something about purchasing cd at a staggered maturity date..3 months, 6 months, 9 months, and 1 years and reinvesting for another year as soon as they mature. I really could use some advice as I am very new to this game.
I really could use some advice as I am very new to this game. FT -- my advice would be that you tell a financial advisor exactly what you told us. Open an investment account with someone like Fidelity Investments and talk to an advisor there. I believe it's all free, so there's no harm even if you disagree with what he or she suggests. Once you're set up, you can manage it all over the internet as well, which is a nice little plus. Like T_J said, if you're looking at a 15-20 year time horizon, it probably wouldn't hurt to mix it up with a few "riskier" investments like mutual funds and the like - over time, those investments are likely to get you a much higher rate of return. The big danger is that they could lose money, and if you're looking short-term, that's a major issue. Over the long run, though, they are likely to be better than bonds. Assuming the 10 year doubling, you're looking at an interest rate on the bonds of about 7%. I find the 6-yr doubling thing a little sketcky -- that's a 12% rate of return with no risk, which is unheard in the current economy. T_J probably would know better on this though.
Thanks. I will probably go in and talk to them like you suggested. I don't think I'm going to get any help from Trader_Jorge. I think I said something that offended him.
You could also check out 529 plans. The earnings are tax free if used for college. The Vanguard 529 College Savings Plan looks pretty good. You can invest in a variety of Vanguard funds if you would like to be more agressive but a 7% return over 10 years sounds pretty good to me.
OK, my advice is solid, but certainly not sophisticated(damn how do you spell that). I worked in 2 different banks before my current employ and have sold many Bonds and open many more CD's what you refer to as Patriot bonds are just your basic garden variety EE Series Bond. they actually take closer to 14 years to mature these days, and are basicly only good for births and baptisms and stuff. they used to be bought for communiona dn such but are rarely fully mature by the time a kid wants to use them an option to EE bonds are I bonds. they cost the same amount, pay more intrest, however they dont "double" in value. The bond says 50 bucks on it if you paid 50 bucks for it. I bonds are a better investment in general, so you may want to get those for the little bugger as they continue to gain intrest for like 25 years the EE gain intrest for 25 years I think too, but it slows down after the value is doubled CD's you can get simple 1 month roll over CDs that pay pretty much double that of a traditional savings account. 1 month roll over is a decent choice right now, but 6 month is likely better. anything with a longer term gives better intrest rates, however with rates really low right now, you do not want to tie up your money into a low rated account for 1 year or more. within a year the rates will be higher and you will be missing out on the high intrest. Once the rates get high you can get a 5 year CD depending on the ammount you deposit at around 8-9% wich is a prety damn good return. one of my clients had a 9.5% 5 year CD on 2.5 million bucks. and he got it at just the right time. He likely still has another year or two at that rate while everyone else can only hope for 4% if they are lucky (very lucky) some keys though. put more away now and less later as it will be worth so much more in 16 years. also with CD's. dont be loyal to your bank. they all offer different rates, and have certain deals at times, so check around. there should a a paper that prints them all 1 day of the week (its Newsday here in NY) go after the better rate as they are all the same. there are a lot more options, but if you like guarenteed rates these are the basics. some banks have investment divisions that also offer guarenteed rates.
This is what I was gonna suggest, but it looks like the "Texas Tomorrow Fund" is Texas' version of the 529 plan. There are many things you can do with your money. The goal is to identify what your level of risk is, match that level of risk with investments, while effectively minimizing tax-level. Traditional savings bonds would be ok if you are risk averse, meaning you wouldn't be able to sleep at night if your investments weren't performing up to expectations. A more common route would be to invest in mutual funds. I dont know your specifics, but ideally you'd invest in a tax-defferred IRA if taxes are an issue. Another option would be to invest in individual stocks. This is more risky than investing in mutual funds, however you could purchase a small amount of shares now, and re-invest the dividends you receive in the company's stock through DRIP programs(Div. Reinv. Prog.) This would require a little more discipline(filling out forms,etc.) but I think people tend to enjoy investing by doing this.
Didn't the treasury start issuing inflation protected notes/bonds? That might be a way to go. Vanguard has more information than you shake a stick at here . Here are some more thoughts: Educate yourself about investing. An excellence place to start is "Asset Allocation: Balancing Financial Risk" by Roger C. Gibson, floowed by "Making the Most of Your Money" by Jane Bryant Quinn. The grandparents can make yearly gifts (< $10,000) that can help. Grandparent who are intent on leaving money to their grandchildren in their wills should strongly consider this. Parents (and grandparents) can help their kids setup Roth IRAs in their teens when they start working. For example, the parents could gift the child a match of their child's yearly income that will go into a Roth IRA. The match will be limited by the yearly Roth IRA contribution limit. If parents continue to do this up until their children turn 30, they can guarantee their child will have a million dollar nest egg on the child's retirement.
Actually Texas has the 529 plans and the Texas Tomorrow Fund. The TTF is just for tuition, while the 529 plan which is tax-free can be used to pay for things like room and board, books, etc that the TTF plan doesn't cover. http://www.texastomorrowfunds.org BTW Falcons Talon - my son is 2 also (8/24/00) and I will be starting the TTF next August, a little over 150$ a month. Also I am going to try a 529 plan or maybe some annuities. If you find anything good to invest in please email it to me. Thanks.
If your ex-wife has set up the Tommorrow fund for your son, he should be ok from that standpoint. For your $50 a month, I would start a vanguard account and add the $50 a month with monthly checking feature. You could invest in the Vanguard 500 Index which mimics the S&P 500 Index. The cost is very low and the return on the index over time has performed better than bonds or cash.
