Starting investment for a child turning 18

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Gary22
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Joined: Thu Nov 25, 2021 10:23 am

Starting investment for a child turning 18

Post by Gary22 »

I have a son who will be 18 in a few months, but is not expected to have earnings any time soon. I want to open a (taxable) investment account for him (with just contributions to a single US total market index fund) partly to get his compounding started early, but more so to build awareness and inculcate the culture. Would I be able to invest into his brokerage investment account after he is 18 i.e., link my bank account for small monthly contributions (as this will not be a UTMA custodial account). Would it be better to open a joint account with his and my name, or with his name and both of us parents?. or is there any better way to do this? Thank you for any guidance
dbr
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Re: Starting investment for a child turning 18

Post by dbr »

I'm not sure I would be opening joint accounts with an adult child or linking my checking account to someone else's brokerage account if that is even possible. They can have their own accounts.

If you want to transfer money from your checking account to his you could use Zelle or something like that. Periodic transfers can be set up. You can also just write him a check and if he doesn't want to visit the bank he can deposit it using a mobile app. He can do his own investing from his bank account.
Topic Author
Gary22
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Re: Starting investment for a child turning 18

Post by Gary22 »

Good advice. Thank you
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rob
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Re: Starting investment for a child turning 18

Post by rob »

The 18 year old can give you agent auth to manage the acct or to just see it if you want them to do the activity with you having some visibility.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
invest4
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Re: Starting investment for a child turning 18

Post by invest4 »

Alternatively, perhaps your son may consider a part time job now which has many benefits including the ability to make his own Roth contributions? Learning by doing...real-life experience with employment and his own money vs a simulated one. YMMV.
Topic Author
Gary22
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Re: Starting investment for a child turning 18

Post by Gary22 »

thank you. The "agent authority" idea sounds great. I will try and figure out how to do that. and Yes, i was planning to convince him of all earnings (which are pretty small, like from walking the neighbors dog) go into a roth IRA. appreciate all the feedback
ivgrivchuck
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Re: Starting investment for a child turning 18

Post by ivgrivchuck »

I believe that your son should open his own checking account, brokerage account, deposit a check from you, transfer money from checking account to brokarage account, then invest. Then file a tax return...

Of course in the beginning he'll need some help from you, but these are some basic financial skills to learn. The more hands-on it's from his side, the better...
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
Topic Author
Gary22
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Joined: Thu Nov 25, 2021 10:23 am

Re: Starting investment for a child turning 18

Post by Gary22 »

This forum has such good advice and perspectives. Thank you!
ronno2018
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Re: Starting investment for a child turning 18

Post by ronno2018 »

My dear daughter (19yo) said a friend told her to open a Roth IRA. I said yes, great idea and guided her to a Vanguard target ETF. Hopefully it will work out.

Great comments above on how to contribute to it as a parent!
Topic Author
Gary22
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Joined: Thu Nov 25, 2021 10:23 am

Re: Starting investment for a child turning 18

Post by Gary22 »

On that note, would anyone be willing to advise a portfolio suggestion for a 18 year old starting with a roth. would you still follow the simple VTI/VXUS simplicity or due to its tax advantage have some different funds
dbr
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Re: Starting investment for a child turning 18

Post by dbr »

Gary22 wrote: Sat Nov 27, 2021 12:01 pm On that note, would anyone be willing to advise a portfolio suggestion for a 18 year old starting with a roth. would you still follow the simple VTI/VXUS simplicity or due to its tax advantage have some different funds
Generally due to its tax advantage those funds are exactly what you want. Many years from now when large capital gains have accrued the value will be available tax free. The only other way to avoid big tax costs on large lifetime accumulations is to let the money go to heirs at basis step up or give it away.
Topic Author
Gary22
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Joined: Thu Nov 25, 2021 10:23 am

Re: Starting investment for a child turning 18

Post by Gary22 »

had not thought of the obvious :-). thank you
jwfails
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Re: Starting investment for a child turning 18

Post by jwfails »

My youngest decided to go the military route instead of college and he just got out. I told him I spent a lot of money on the other two’s college, so I wanted to help him start saving for his retirement. I helped him set up a Roth IRA and funded it for him this year (VTSAX/VTI). He is in the lowest tax bracket, so I felt a Roth was the way to go. My only caveat to him was he had to set up auto draft of $50/month to get started. He has a city job with a pension, so hopefully a good start.
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