Investment for child - tax consequences

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consinv
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Joined: Sat Mar 14, 2020 1:15 pm

Investment for child - tax consequences

Post by consinv »

In the Guide to Investing book there is as simple example of how compounding works. In it, it shows if you invest something like 50c a day from the day your child is born and invest it where you get 10% average annual return (this is an assumption), by the time the child is 65 years old, they will have a nest egg of $1M.

It was a very enticing concept, to save a nestegg for your child. If I wanted to emulate that with post tax dollars, what would be the most tax efficient way to go about it?

My simple approach was to create a new account in Robinhood (in my name since my son is < 18), and invest any money I can (smaller amounts, on some regular schedule) in VTI and explain to my son to regularly add to it (after I am gone) and not touch it till he turns 65+.

Disclaimers: I understand that the amount may not grow to $1M exactly by the time my son is 65. I also understand that markets go up and down. And that eventually, a more stable asset allocation will be required as he approaches retirement.
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