Investing cash gifts received for newborn

For residents of the United Arab Emirates.
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The Planner
Posts: 120
Joined: Mon Dec 29, 2014 5:33 am
Location: UAE

Investing cash gifts received for newborn

Post by The Planner »

We recently had a baby. We are expats and live in Dubai (and we are not Americans). A few relatives have given cash gifts totalling 200 USD for the baby to be used as we see fit. It's a small amount but as more cash gifts are received it will add up.
Rather than spend it on clothes and things like that, we were thinking to invest it and perhaps match every cash gift 100% as we go.

Now, we have no tax liability due to where we live so we can invest as we see fit in whatever we want. There's no capital gains tax, but also no retirement or pension provision or social security.

Would we be better off opening a sub-account for our son and investing in an ETF (such as total stock market) or just adding the sum to our own regular investments (some of which will in any case go to the baby in due course for education and things of that sort)?

The purpose of investing for him is simply to grow wealth for him, to be used to cover (in part) education or whatever other milestone costs arise over time.

Thanks.
Lafder
Posts: 4117
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Investing cash gifts received for newborn

Post by Lafder »

I would either:

1) Open a regular bank account in you names and your son's name. Banks here allow minor children to have joint accounts with their parents. Once the balance grows a bit, you can move the money to investing.

2) Open an investment account in the parent's name, that you know if for your child some day.

I have done both. The bank accounts I used to put birthday gifts (about 100$/year). But as the kids got older I added a debit/Visa to the accounts and that is where I put their allowance now.

We also have a Lifestrategy Moderate Growth account at Vanguard in mine and my husband's names that we know was a gift from relatives for when our kids graduate from highschool. It is about 5k each plus whatever growth has happened, so well below an easy amount for us to gift to them.

It depends on how large you think the account will be some day. 1000s or 100, 000s.

In general I prefer keeping money in parents' names :) But others have strong opinions against this.

lafder
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