Best way to invest for our kids?

[AmandaD]

We have money for our 2 children that we dont want them to touch/have access to until they are around 16 years of age

I am not sure the best way invest it becuase of how low the rates are? should we wait? we want to add about 100 to each kid per month and would like it to gain interest...is bonds the best way because the economy is so bad?

[pennylayne]

I have an insursance anuity I get ever couple years. the one I recieved after our daugher was born, I put into an 18 year life annuity through ING. I was able to secure a 3.9% in the interest, no matter how the economy does, it will never fall below that. She will have around $90,000 by graduation. nobody can touch it, and it wasn't damaged by the crash last fall.

[familyof4]

This is a good question. Not that I have children yet, but I will still be watching this post

[Amy]

I would get mutual funds. Bonds are very low risk, but you don't get a whole lot of return either.

Right now the stocks and mutual funds are like on clearance, so you can buy more for your money. And the market will get better...you wouldn't want to take money out right now, but putting it in is a good idea! If, when they're 16, the economy is doing poorly, they can just hold tight onto their mutual funds- any loss is just on paper until the money is taken out.

[hteew]

Oooh good thread! Does anyone do those 529 plans for college? I have been looking into them for Madeline but not sure if it is best right now?

[ProudArmyWifeD]

I have a 529 for DD and contribute to it each month.

I got worried when things went south a few months ago, and asked my USAA advisor and this is how he explained it to me, "If you are putting money into it each month, with the economy the way it is, it is like you are buying the investments 'on sale' because things are so low right now, and since the money will not be touched for another 16 years, by then the economy will have rebounded and you will have made out."

Which made sense to me, so I don't worry about it. The balance is down right now, but like he said, since we won't use that money for 16 years, a lot can happen between then and now.

I have half of it going into a fund that is "low risk" and half of it going into a fund that is "age based" - which means it buys into higher risk items when she is young and has a lot of time before she'll need the money and gets lower risk as she nears the age of going to college.

[jlbecker]

good thread
my parents set up GE accounts for us growing up. (it's basically the same as ING, but i think they get slightly better rates)

[hteew]

Ooh thanks so much for the info. I think I may look into a 529 with USAA.

[Aunt Sponge]

Spread your investments around.
Even if you can only invest $10.00/month - spread it between two different arenas. Like: Stocks and a Savings Bond.

The reason is because if (for one example) the company you have a stock annuls itself and is no longer in existance you will not be up a creek and suddenly without any money. (This has happened ALOT recently and a lot of people have lost thousands.) OR - worse yet - you could be swallowed by a Ponzi scheme like Madoff committed to. Some regular people like you and me thought he was a smart person to invest with and he was just a devilish thief. They lost everything - more than $200,000 that the gov't will now back you for.

For our children and ourselves we have several portfolios that are balanced and each arena of investing has it's own purpose:
Savings Bonds (These are there for when they go to college and only if they go to college. We buy one or two per child per year for $50.00)
Savings account (This if for unforseen circumstances and their future use. Example: my son racked up $300.00 in debt to the school - we took ti out of his savings account.)
Stocks (I will auto-man ours, no accountants and other people to be my middle man. Some stocks will pay dividends while I will deposit evenly into our saving's accounts. Other are only profitable upon sell-off. Thus I'm expect certain companies to increase in value over the years and be worth quite a bit in the future.)
And an IRA for us (Of course - this is retirement)

[Amy]

You don't have to just diversify by having stocks, bonds, mutual funds, and cds. Or what have you. You can just diversify within each category. Mutual funds are pretty diverse- that way rather than holding, say, just Walmart stock, you have hundreds of different companies, so if one goes down, the others that are going up tend to balance it out. If you just want one fund, you would probably look for a balanced fund- otherwise try to diversify your holdings by picking funds from different categories in the morningstar style box- growth and income, small and large cap, etc.