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$1,000 for Baby’s Future: What Yields the Best Results?

Andmetoo

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I’ve decided to kickstart planning for my daughter (7 months) with $1,000. To my financial gurus, what say you?

Where should I start and what would be a suitable monthly contribution?

I had planned to start AS SOON AS she was born, but my brain was fried and it is double fried now that I returned to work. Just got some breathing room.

My first thought is a 529, but there are SO many options. I’m overwhelmed. Should I pick one direction or diversify and put money in a variety of options?

Thank you!
 

EmpressK

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I' m also sitting. I was gifted $1000 for my baby girl and was unsure of where to put it to get the most return.
 

Andmetoo

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I haven’t asked my financial advisor yet, but I am sure she will say put it towards student loans or car note. I understand the all-up thinking, but if I’m going to be wrong, I want it to benefit my baby.

In terms of 529s she said Virginia’s was good (advisor needed) as well as Utah’s (non-advisor). I’m in Washington state. Hoping someone chimes in with the goods, but I figured I’d share the little I’ve heard of.
 

PinkPancakes

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I would open a separate savings account and contribute money to it every month or every few months. By the time she is of college age you will have saved several thousands (depending how much you contribute). $1000 a year will be $20000 in 20 years.
 

Tabitha

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I'd recommend a custodial account. The difference between a UGMA/UTMA and a 529 is when she turns 18 she can use the money for anything not just educational expenses. Also anyone can contribute to her account like grandparents, aunts, etc. The only downside is contributions above $15k (or $30k for married) is taxed and none of the contributions are tax deductible. The account is also non-portable (can't transfer to other siblings if not used). You can invest in an ETF stock (I recommend VTI or when you reach $3000 minimum you can buy a mutual fund VTSAX)

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) allow you to save on behalf of a child for education or any other purpose that benefits the child (other than parental obligations such as food, clothing, and shelter).​


Also, when she gets to working age you can open up a Roth IRA in her name as a minor. That will help her build a lot of wealth before she turns 18.
 

debb

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I'd recommend a custodial account. The difference between a UGMA/UTMA and a 529 is when she turns 18 she can use the money for anything not just educational expenses. Also anyone can contribute to her account like grandparents, aunts, etc. The only downside is contributions above $15k (or $30k for married) is taxed and none of the contributions are tax deductible. The account is also non-portable (can't transfer to other siblings if not used). You can invest in an ETF stock (I recommend VTI or when you reach $3000 minimum you can buy a mutual fund VTSAX)

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) allow you to save on behalf of a child for education or any other purpose that benefits the child (other than parental obligations such as food, clothing, and shelter).​


Also, when she gets to working age you can open up a Roth IRA in her name as a minor. That will help her build a lot of wealth before she turns 18.
This is so thorough.

Another thing, OP add a bond fund (ex: Vanguard's BND) to balance the portfolio so you don't freak out when the markets go crazy. Maybe around 20-30% of the portfolio?

Also, DO NOT PULL OUT OF THE MARKET. No matter how ugly it gets, control your emotions and stay the course.
 

Andmetoo

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I would open a separate savings account and contribute money to it every month or every few months. By the time she is of college age you will have saved several thousands (depending how much you contribute). $1000 a year will be $20000 in 20 years.
I was thinking this would be a good supplemental approach. Thanks!
I'd recommend a custodial account. The difference between a UGMA/UTMA and a 529 is when she turns 18 she can use the money for anything not just educational expenses. Also anyone can contribute to her account like grandparents, aunts, etc. The only downside is contributions above $15k (or $30k for married) is taxed and none of the contributions are tax deductible. The account is also non-portable (can't transfer to other siblings if not used). You can invest in an ETF stock (I recommend VTI or when you reach $3000 minimum you can buy a mutual fund VTSAX)

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) allow you to save on behalf of a child for education or any other purpose that benefits the child (other than parental obligations such as food, clothing, and shelter).​


Also, when she gets to working age you can open up a Roth IRA in her name as a minor. That will help her build a lot of wealth before she turns 18.
I wasn’t aware of this! Thank you! With some of the 529s you can contribute up to $500k (or does it yield up to $500k, not sure). Would you happen to know if these have similar caps? I can certainly investigate deeper, just wondering if you knew off the bat.
This is so thorough.

Another thing, OP add a bond fund (ex: Vanguard's BND) to balance the portfolio so you don't freak out when the markets go crazy. Maybe around 20-30% of the portfolio?

Also, DO NOT PULL OUT OF THE MARKET. No matter how ugly it gets, control your emotions and stay the course.
Thank you. My husband was that way about his 401k (not being swayed by the market) and it has paid off tremendously. Hopefully, when he retires, it will still be healthy. So there’s merit in your warning and I’m listening!
 

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