investing for kids http://www.wisebread.com/taxonomy/term/11656/all en-US Opening a Roth IRA for Your Kid http://www.wisebread.com/opening-a-roth-ira-for-your-kid <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/opening-a-roth-ira-for-your-kid" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/566087174_4b0055634f_z.jpg" alt="smiling mother daughter" title="smiling mother daughter" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>My parents have done a lot for me. But one of the things I am the most grateful for is that they opened up a Roth IRA for me when I was in high school, the first year that the account was available.</p> <p>Like many people, I didn't think much about long-term savings when I was younger. Most of my goals were relatively immediate, saving for things like a video camera, travel, or the security deposit for my first apartment. And I remained similarly short-sighted at my first couple of jobs post-college. Convinced I wouldn't be at my first job long enough for them to start matching my contributions, I&nbsp;passed on contributing to my 401(k). I felt extra sour about that particular company's retirement plan when I discovered that my holiday bonus &mdash; a deposit into my 401(k) &mdash; disappeared when&nbsp;I quit because I hadn't vested. So what did I do? I said &quot;screw it&quot; to retirement savings, and ignored the 403(b) at my next job, too.</p> <p>Flash forward to now &mdash; after several years of freelancing and learning about finances, I wish that I had the foresight to set up a 401(k) when I could have. But that also makes me extra thankful for the retirement account I do have, and have had since my teens &mdash; my Roth IRA. (See also: <a href="http://www.wisebread.com/why-roth-iras-are-ideal-for-young-professionals">Why&nbsp;Roth&nbsp;IRAs Are Ideal for Young Professionals</a>)</p> <h2>Some Roth IRA Benefits</h2> <p>Anyone who has earned income can set up a Roth IRA, and the accounts are generally very easy to open.</p> <p>Roth IRA account holders can withdraw any funds they contributed to their account, tax-free, at any time. While I don't think it's good practice to encourage people to tap into their retirement savings early, this can be helpful. For example, I once removed a couple thousand dollars from my Roth IRA so that I could buy an inexpensive used car without resorting to a loan.</p> <p>Even some Roth IRA earnings can be withdrawn before retirement time under certain circumstances, such as when you're <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">buying your first home</a>.</p> <h2>Setting Up Roth IRAs for Kids</h2> <p>As I mentioned above, who has earned income can set up a Roth IRA. You can't pay your kid to do work, but if he has a summer or part-time job, he's eligible. Even cash jobs like babysitting can count. According to Janet Bodnar at <a href="http://www.kiplinger.com/columns/drt/archive/2008/dt080130.html">Kiplinger's</a>, if your child mows lawns for the summer, you just need to &quot;keep careful records of each job...And it would make a stronger case if he mowed lawns not just for you but for other customers as well.&quot;</p> <p>If your child has spent part (or, well, all) of her money, you can also kick in cash on her behalf &mdash; but the maximum contribution is $5,000 or the total of your child's earned income, whichever is smaller.</p> <p>Bodnar also notes in her piece that some companies will not open accounts for children under 18. Others, do, however; just know you might have to search around a little bit to find one.</p> <p>Did you set up a Roth&nbsp;IRA for your child? If so, what was your experience?</p> <p><em>The post is part of the </em><a href="http://www.goodfinancialcents.com/roth-ira-account-movement/"><em>Roth IRA Movement</em></a><em>.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/meg-favreau">Meg Favreau</a> of <a href="http://www.wisebread.com/opening-a-roth-ira-for-your-kid">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-set-up-an-ira-to-build-wealth">How to Set Up an IRA to Build Wealth</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/step-by-step-guide-to-rolling-over-your-old-401k">Step-By-Step Guide to Rolling Over Your Old 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-you-must-open-a-roth-ira-before-april-15">4 Reasons Why You Must Open a Roth IRA Before April 15</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras">7 Surprising Facts About Roth IRAs</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement children and money early retirement withdrawal investing for kids Roth IRA Tue, 27 Mar 2012 10:00:32 +0000 Meg Favreau 913196 at http://www.wisebread.com Getting Kids Started with the Stock Market http://www.wisebread.com/getting-kids-started-with-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/getting-kids-started-with-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/stock market.jpg" alt="stock market board with bull and bear fighting" title="stock market board with bull and bear fighting" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Recently, a reader asked how to give stock to kids in her life in an effort to inspire a life-long interest in investing. Now seems like a <a href="http://www.wisebread.com/why-young-investors-should-stay-the-course-and-continue-to-invest">great time to start investing</a> but opening an account for someone who isn't your child (a nephew or niece, for example) isn't as straightforward as handing over cash.</p> <p>The investments may cause a burden on the child or the family members. Here's why:</p> <ul> <li>There may be fees associated with the account, such as annual maintenance fees and transaction costs.</li> <li>Account owners may owe income taxes on dividends and stock sales.</li> <li>The account value will likely impact the <a href="http://www.fafsa.ed.gov/">financial aid status</a> of the child (though the investments should be useful in paying for educational expenses).</li> </ul> <p>Ideally, you can open an account with low or no fees and the account will be structured in a way that minimizes the tax consequences. Issues to consider in addition to fees, taxes, and financial aid:&nbsp;</p> <ul> <li>ownership and control of the account (usually the parent or legal guardian controls the account as its custodian)</li> <li>methods of making additional contributions (purchasing additional shares of stock or mutual funds)</li> <li>type of investment:&nbsp;individual stocks and/or mutual funds</li> <li>tax structure of the account:&nbsp;college savings account (such as a 529 plan or Coverdell ESA-Educational Savings Account), Roth or Traditional IRA&nbsp;(kids can have these types of accounts but need earned income to qualify for funding the account), and regular/custodial account that will be taxed at the child's tax rate, usually lower than the parent's rate.</li> </ul> <p><em>Finally, the tricky thing about opening an account for someone else is that typically you'll need the Social Security Number (SSN)&nbsp;of the child and/or the custodian. Privacy concerns, even among friends and family, may cause well-intentioned gift-givers and recipients to shy away from starting an investment account or allowing another person to open the account.</em></p> <p>Still, there are ways to get kids started with investing. Consider these methods: &nbsp;</p> <p><strong>1) Get things ready to start directly investing in shares of a chosen company using a DRIP-Dividend Reinvestment Plan, generally a low-cost option<br /> </strong></p> <ul> <li>Choose a company with a DRIP (<a href="http://www.wisebread.com/slow-drip-into-investing">see explanation of DRIP</a>) or Direct Investment Program. Companies that have these plans include Target, Best Buy, Lowe's, Home Depot, Nike, Disney, Harley Davidson, Pepsico, Procter &amp;&nbsp;Gamble, and 3M.</li> <li>Compare plan options at <a href="http://www.dripadvice.com/index.html">DRIP&nbsp;Advice</a> or do your own research of start-up fees, minimum investment amounts, maintenance fees, etc.</li> <li>Request or download and print enrollment forms.</li> <li>Get some tangible item that represents the company: order the annual report (or download and print one), a logoed shopping bag, store gift card, or a company product (Nike shoes) for example.</li> <li>Write a check to fund the account opening and initial purchase of shares. You can write a check to the child or the parent; or give cash.</li> <li>Put everything together in a <a href="http://www.wisebread.com/36-green-gift-wrapping-ideas">nicely wrapped package</a> (your gift and paperwork).&nbsp;</li> <li>Let the parent or legal guardian take care of opening the account.</li> </ul> <p><strong>2)&nbsp;Transfer funds from your account to the child's account</strong></p> <ul> <li>You'll need to start by owning some investments that you think will be worthwhile to transfer to someone else<strong>. </strong>Presumably, if you are interested in helping a young person learn about the stock market, you've acquired some investing experience and hold some sort of investments that can be transferred. However, you may want to start learning yourself and you can acquire stock now to be transferred later.&nbsp; <strong><br /> </strong></li> <li>Initiate a transfer.</li> <li>Tell the child recipient about the<a href="http://www.fool.com/personal-finance/taxes/2003/09/05/transfer-stock-to-kids.aspx"> gift / transfer</a> and pass along accompanying paperwork.</li> <li>Let the child and parents open an account to receive the stock.</li> </ul> <p><em>Using approaches 1 and 2, you can avoid having access to the child's Social Security Number, so that the parent doesn't need to feel uncomfortable about sharing personal information. </em></p> <p><strong>3)</strong> <strong>Open a 529 Plan for college savings<br /> </strong></p> <ul> <li>Choose a <a href="http://www.wisebread.com/529-plans-for-college-expenses-what-s-cool-and-what-s-quirky">529 Plan</a> offered through your state, another state, or an <a href="http://www.independent529plan.org/index.html">independent group for participating private schools</a>. Typically, you'll choose from a menu of plans that invest in mutual funds and bonds, rather than selecting individual stocks.</li> <li>Sign up for the plan as the account owner and designate the child to whom you want to make a gift as the beneficiary.</li> <li>Make a contribution to the plan to open the account and then make periodic contributions, such as a gift for birthdays and special occasions.</li> <li>Create a memorable gift by wrapping a savings bank or some item that represents higher education (a t-shirt or sweatshirt of a favorite college) with an accompanying mention of the contribution (or, if the child is old enough, copies of the plan statement).</li> <li>Keep in mind that funds in the 529 plan need to pay for qualified educational expenses and you can change the beneficiary (though that would negate the value and intent of the gifts over the years).</li> <li>The child will get a general idea of how investing works but won't be able to make decisions about the investment beyond choosing various plans, similar to the selection of a 401(k) plan; also the child probably shouldn't contribute to the account as he/she is not the owner and the beneficiary can easily be changed.</li> </ul> <p><strong> </strong><strong>4)&nbsp;Try these options</strong></p> <ul> <li>Open an account with a <strong>mutual funds company,</strong> such as <a href="http://www.vanguard.com/">Vanguard</a> or <a href="https://ww3.janus.com/Janus/Retail/HomePage">Janus</a>. Initial minimum investment is high:&nbsp;$3,000 for Vanguard and $1,000 for Janus (or just $500 with Janus if you make automatic investments). Both companies offer various account types such as Custodial Accounts for Minors and Coverdell ESAs. Investments will be in mutual funds rather than individual stocks.</li> <li>Open an account with an <strong>online brokerage company</strong> such as <a href="https://us.etrade.com/e/t/home">E*Trade</a> or <a href="http://www.tdameritrade.com/welcome3.html">TD&nbsp;Ameritrade</a>.&nbsp; Account requirements vary but you can get started with a nominal investment amount and avoid maintenance and transaction fees. You can invest in stocks, bonds, <a href="http://www.wisebread.com/mutual-funds-for-wise-bloggers">mutual funds</a>, and exchange-traded funds (ETFs).</li> <li>Open an account with <a href="http://www.sharebuilder.com/sharebuilder/Default.aspx">ShareBuilder</a>, which has minimal account fees depending on the plan. You can start a Coverdell ESA&nbsp;or Custodial Account. (See this post for a comparison of <a href="http://www.wisebread.com/stock-investing-online-sharebuilder-vs-discount-brokerage">ShareBuilder vs. Online (Discount)&nbsp;Brokerage Company</a>.)</li> <li>Buy a share and stock certificate from <a href="http://www.oneshare.com/">Oneshare</a>. This option seems cool as the gift includes a framed stock certificate and start-up guide, but is the most expensive approach. The process looks simple but you'll still need the child's SSN&nbsp;for a gift.</li> </ul> <p>To help guide your decision, talk with your CPA, financial advisor, plan administrator, etc. and whoever may be responsible for keeping up with the investment.</p> <p>Have you had great success (or unintended consequences) in starting an investment account for a child?&nbsp;Share your experiences in the comments.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/getting-kids-started-with-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-4-greatest-stock-reversals-in-the-last-decade">The 4 Greatest Stock Reversals in the Last Decade</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/opening-a-roth-ira-for-your-kid">Opening a Roth IRA for Your Kid</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-debate-between-buy-and-hold-vs-timing-the-market">The Debate Between Buy and Hold vs Timing The Market</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing for kids stock market Tue, 29 Dec 2009 14:00:19 +0000 Julie Rains 4203 at http://www.wisebread.com