Park tiny amount for teens??

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earlywynnfan
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Joined: Thu Nov 08, 2018 1:46 pm

Park tiny amount for teens??

Post by earlywynnfan »

I know there are a lot of "where do I keep my downpayment" type threads, but this one has me at a loss. MiL gave both of my daughters a small amount of seed money, which we are going to put aside for house funds for them. We're talking 4 figures. By nature, I'm a pretty aggressive investor for my own finances, but I'd hate to see this lose value. My girls are 18 and 19, so there's maybe a 5-7 year window?? I'm also an ostrich, so I don't want to have to shuffle it around, just somewhere to set and forget.

So where would you guys park this?

Thanks, Ken
Arabesque
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Joined: Mon Jan 08, 2018 8:56 am

Re: Park tiny amount for teens??

Post by Arabesque »

In most states, 18 year is adulthood (except for alcohol). 18 year olds can be vote, join the military, enter binding contracts, be tried as adults, etc. I think you should let your daughters decide what to do with their nest egg. Obviously you would discuss it, but I would encourage them to do the research and make the decisions.
dbr
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Joined: Sun Mar 04, 2007 8:50 am

Re: Park tiny amount for teens??

Post by dbr »

They can open accounts at Treasury Direct and buy $10,000 or less each in I bonds. You can also deposit the money by gifting it from your account, but they will still have to have accounts. It will be worthwhile introducing them to the Federal Bureaucracy. While they are at it they might want to open an account with the IRS and go ahead and get enrolled at ID.me. That way they can examine their tax history and track deposits to their tax accounts.

There is an argument to be sure to be enrolled in your own ID in places like this before an ID thief does it for you.

Except for the suggestion to put the money in I bonds I am being somewhat sarcastic.

see here:

viewtopic.php?f=11&t=363837

and

viewtopic.php?f=1&t=356280
bhough
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Re: Park tiny amount for teens??

Post by bhough »

I've put a little money for my kids in treasury direct I bonds, but also in a custodial account with vanguard. I feel the same pinch--don't want them to see a loss, but also want to grow their money. In both accounts, they can legally withdraw and spend on frivolous/dangerous things at age 18, so I'm only putting in a small amount, mainly to show them monthly statement and how things can grow/not grow/drop as compared to their savings accounts.
bhough
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Re: Park tiny amount for teens??

Post by bhough »

duplicate
dred pirate
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Re: Park tiny amount for teens??

Post by dred pirate »

Arabesque wrote: Fri Jan 21, 2022 10:15 am In most states, 18 year is adulthood (except for alcohol). 18 year olds can be vote, join the military, enter binding contracts, be tried as adults, etc. I think you should let your daughters decide what to do with their nest egg. Obviously you would discuss it, but I would encourage them to do the research and make the decisions.
don't forget 21 for smoking and 25 for rental car haha
exodusNH
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Re: Park tiny amount for teens??

Post by exodusNH »

earlywynnfan wrote: Fri Jan 21, 2022 10:05 am I know there are a lot of "where do I keep my downpayment" type threads, but this one has me at a loss. MiL gave both of my daughters a small amount of seed money, which we are going to put aside for house funds for them. We're talking 4 figures. By nature, I'm a pretty aggressive investor for my own finances, but I'd hate to see this lose value. My girls are 18 and 19, so there's maybe a 5-7 year window?? I'm also an ostrich, so I don't want to have to shuffle it around, just somewhere to set and forget.

So where would you guys park this?

Thanks, Ken
Since they are adults, they should be making the decisions. Anything you do with their money could cause you problems in the future.

I don't think 23-26 year-olds should be buying houses. They shouldn't lock themselves down like that. Renting gives a lot of flexibility.

If they're working, I'd suggest using this money to fund a Roth IRA at an appropriate asset allocation.

If not, a taxable account at an appropriate asset allocation.
oldfatguy
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Re: Park tiny amount for teens??

Post by oldfatguy »

earlywynnfan wrote: Fri Jan 21, 2022 10:05 am MiL gave both of my daughters a small amount of seed money ...
My girls are 18 and 19 ...
Sounds like it is their money already.
Last edited by oldfatguy on Fri Jan 21, 2022 12:47 pm, edited 1 time in total.
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FreddieFIRE
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Re: Park tiny amount for teens??

Post by FreddieFIRE »

I would suggest that they put it 100% in VTI/VTSAX/FZROX/FSKAX, with a guarantee that if it shrinks in the next five years, you'll make them whole. That is a great way for them to understand equity investing without worrying about what the news says about the stock market. I did this with my kids in high school (Roth matches with make whole guarantees).
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
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beernutz
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Re: Park tiny amount for teens??

Post by beernutz »

FWIW, I opened Schwab custodial accounts for both daughters when they were still young teenagers. When they got money as gifts or wanted to save earnings I'd deposit and invest it for them. They've also had their own Regions bank student accounts since that time where we deposited allowances. My oldest has since disconnected her Regions account from ours but I still have my 24 year old's Regions under my account umbrella.

My wife and I have been funding a Roth contributory account for both of them with all of it invested in TSM (SWTSX) so far. I transfer them the money into their Roths and then we have a discussion on how they want to invest it. So far they've taken my advise to put it all in TSM but I enjoy the discussion.

When they turned 21 Schwab discontinued the custodial relationship and they now have control of their accounts.

In your case, I like the i bond option given your daughter's estimated 5 to 10 year holding period and that the investment is guaranteed not to lose money.

Like others have said, I think whatever happens to the money should be a joint decision and possibly a learning opportunity.
AA: 40/41/19 - equities/positive return-zero volatility/bonds
sailaway
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Re: Park tiny amount for teens??

Post by sailaway »

Given your goals, this may be a good case for the bank of Mom and/or Dad: invest the money as you usually would, but keep a spreadsheet that gives them a predetermined percent (or tied to a certain index, such as the ibonds or the prime rate + x or whatever). When the time comes, you can tell them that this is Grandma's money plus compounded interest.
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cowdogman
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Re: Park tiny amount for teens??

Post by cowdogman »

Depending on your risk appetite, either a Marcus savings account/CD or a Fidelity account with an investment in ultra short, short or intermediate (5 to 7 year) bonds. The bond fund duration should match the expected withdrawal date. Probably not a good time to invest in a stock fund for a relatively short period of time.

Or you could bet it all on one stock. Even if they lose money, it might teach them something about investing--like don't bet it all on one stock.
BlueCable
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Re: Park tiny amount for teens??

Post by BlueCable »

cowdogman wrote: Fri Jan 21, 2022 1:39 pm Depending on your risk appetite, either a Marcus savings account/CD or a Fidelity account with an investment in ultra short, short or intermediate (5 to 7 year) bonds. The bond fund duration should match the expected withdrawal date. Probably not a good time to invest in a stock fund for a relatively short period of time.

Or you could bet it all on one stock. Even if they lose money, it might teach them something about investing--like don't bet it all on one stock.
There are much better risk-free alternatives than this. I bonds would be superior to a savings account or ultra shorts since they will not be using money in the next year.

I would recommend either I Bonds or total stock market index, depending if they wanted to take risk. Or a mix.
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cowdogman
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Re: Park tiny amount for teens??

Post by cowdogman »

BlueCable wrote: Fri Jan 21, 2022 3:19 pm There are much better risk-free alternatives than this. I bonds would be superior to a savings account or ultra shorts since they will not be using money in the next year.
I think you're right.
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