Investing Inheritance Money

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muskrat

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My wife's Grandmother just passed and has left $5,000 for the great-grandchildren. My son is one of the beneficiaries and I would like to invest the money. He is only 6 years old so there's plenty of time to allow this to grow. Whether it's college or money to buy a truck and welder for a growing business, doesn't matter. I don't want to lock it down for only one purpose, though. As long as it's not wasted on soul-searching while traveling through Europe when he's 19. We have a financial planner for our (wife and I) investments and I will consult him shortly but I'm looking for ideas before I contact him.

Thanks
 
Since you dont want it earmarked I would just put it in a high yield savings until he is older. First suggestion was a 529 plan but again that is for education.

The other thought is a targeted mutual funds but with that little amount fees may eat into the growth unless your existing FP lets you ride the same fee schedule you have for it.
 
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Talk to your financial guy. Tell him what you want and let him tell you the options. My bet is his first suggestion is gonna be a 529 but that locks it in for education.
 
Fidelity offers accounts with zero cost and zero fees. They also offer an S&P index fund (FXAIF) with incredibly low costs (0.015%). Put it there and forget it.
 
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What I do not like about 529: not everyone wants to go to college, not everyone can go to college, not everyone needs to go to college. Definitely talk to a financial guy.

My wife's best friend's father died August 2018, left all of our kids some money. We are having the same discussions.

I have never been left with money. When my mom died 13 years ago, after burial and all, my sister and I had about $3,000 each left from her life insurance. She invested hers; I bought a gun, a big-screen TV, and a set of industrial pots/pans for my wife.
 
Going to go against the grain on fees here. zero fee accounts are generally zero fee because they have zero management of funds. Meaning the people over them may only check on the funds once or twice a year. A low fee managed fund should perform better over time. We just got out of a zero fee fund and opted for a low fee fund for the above reason. If you want to bypass your guy, Vanguard is pretty easy to deal with. But they might also take that account on for very little extra since you are there already. Depends on how much you have with them sometimes.

You can access a 529 and cash it out and not use it for education. It's just subject to taxes and fees. But to be honest, any decent investment is going to come with a tax burden if they want to access it.
 
Pink_Vapor said:
Great job searching for their best option.
It’d be locking the $ down, but $5K placed in a Roth IRA at the age of 5 would also be a great start. At an average 10% return that’d be $1,522,408 at age 65.
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where can we get a %10 return on investments???
 
I like mutual funds. won't get rich off them but low risk of loss long term and way better than a CD or something if the money can sit over time. They are managed by smart, rich professional money men unlike myself lol. I make enough that I can afford to invest, but not enough where I can yet afford a good financial advisor--maybe in another few years.

In bull market like we had, I've seen about 25% return over past 5 years.
 
DrDover said:
where can we get a %10 return on investments???
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I've averaged 24.6% on my .mil/.gov Thrift Savings Plan over the last several years, with a mix of G-Fund (bonds & T-bills), small cap index fund, S&P 500 index fund & an international currency fund. Balance has almost tripled since my last contribution in late '08.
 
Given that you have a substantial amount of time, I would go one of two ways. Either find a stock that is known for paying good dividends and that has a DRIP program and invest it with them. I put a few hundred dollars into a few back in the 90s and they're now worth in the 10's of thousands. The other option would be to find (what I think are called) index funds, such as the QQQ that would basically give you straight market returns instead of trying to over perform and instead under performing.
 
Pink_Vapor said:
Great job searching for their best option.
It’d be locking the $ down, but $5K placed in a Roth IRA at the age of 5 would also be a great start. At an average 10% return that’d be $1,522,408 at age 65.
Click to expand...

This is along the lines of where I would put the money but the problem is that you cannot put it into a Roth IRA unless the 6 year old has income. Also there is no way they are going to get 10% over their entire lifetime 5-6% is more realistic. That $5000 will still become about $200,000 so that is nothing to sneeze at. This does not have to be W2 income but it has to come from an income source.

https://www.nerdwallet.com/blog/investing/why-your-kid-needs-a-roth-ira/

The child must have earned income. If a kid has earned income, he or she can contribute to a Roth IRA. Earned income is defined by the IRS as taxable income and wages — money earned from a W-2 job, or from self-employment gigs like baby-sitting or dog walking. (If you want to contribute to your child’s Roth IRA or match your child’s contributions, that’s fine as long as she has at least as much earned income as the total contribution amount.)

What I would do is put it into a low cost or no cost index fund. Reinvest the dividends. Once the child is old enough to mow lawns, baby sit or get a part time job. Document the earnings. Then take the money annually out of the index fund and place it into the IRA. It might take you a few years to transfer it over but once you have it will be in the Roth growing tax free. The principle can be accessed at anytime for any reason. If you take earnings out before 59 1/2 you might have to pay a 10% penalty and income tax on the distribution. If the child continues to put money into it over their working lives this will increase the principle and hopefully they will not have to access the earnings until retirement. Time is your greatest asset in this scenario.
 
Crazy Carl said:
I've averaged 24.6% on my .mil/.gov Thrift Savings Plan over the last several years, with a mix of G-Fund (bonds & T-bills), small cap index fund, S&P 500 index fund & an international currency fund. Balance has almost tripled since my last contribution in late '08.
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We have had a very good run but historically 10% is not realistic over ones lifetime. For example
The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8% (7.96%).
 
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Lots of great real advice...

so me...the guy who works at a bank, will just add...

Buy 100 lower receivers.
 
Jeppo said:
Low cost S&P index fund.
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This, or I like a total market index fund like Vanguard's "Total Stock Market Index Fund Admiral Shares" (VTSAX).

Disclaimer: I am not a financial advisor and didn't stay at a Holiday Inn. But me and the wife have some of our IRA money in this and it's done well with negligible fees.
 
The smart thing is often to diversify, but it’s super boring to own an index fund. Maybe start with that so you can ignore it for the next 8 years, but then start thinking about letting him direct some of his own investments. The best way to learn the game is to play the game. It’s more work for sure, but it’s an opportunity to help him get ahead in the long term. If he’s industrious he’ll do better with a $1,000 mower than he will just about any other investment, so be prepared to be flexible.
 
Pink_Vapor said:
Great job searching for their best option.
It’d be locking the $ down, but $5K placed in a Roth IRA at the age of 5 would also be a great start. At an average 10% return that’d be $1,522,408 at age 65.
Click to expand...

In order to put it in a Roth, he has to have $5k in taxable income.
Become a photographer and pay your kids a modeling fee, then put their entire income in an IRA.
 
With silver at $18.00 per oz you could buy roughly 25 10oz bars ($187ish per bar w/fab costing) for 250oz of silver. It’s a wildcard but in 12 years when he’s 18 years old (or 15 when he’s 21) he could have a nice little hoard or if things go really south like Dems want a real safety net.
 
Jeppo said:
Your son would have made $42 today in a S&P index fund. ;)
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This is a good place to park money for long term. Own a portion of the 500 companies in the S&P index.
Fidelity ETF FUTY Fidelity MSCI Utilities Index or similar ETF, trades like a stock.
 
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