| Simon,
I have separate accounts for my 2-year-old twins for a lot of reasons,
but mostly because I think of them as separate and not as a unit, and
they each may have a different goal for the money when they are old
enough to use it. I started by saving all the money they received as
gifts for Christmas and birthdays, and had $10 a week per child taken
out of my check. When it reached $1000 each, I started a mutual fund
for each of them. I have since raised my weekly deduction to $20 per
child per week, and when I get $100 in the account, I send it in to the
mutual fund.
I didn't set up the accounts in their names as I like having control
over the funds, and if they want to waste the money on drugs or cars
when they are 18, they can't do it if the money is not in their names.
And since we'd pay the taxes at our rate til they turn 14 anyhow, I
don't see any advantage to having the accounts in their names. To
distinguish, I just put my name first and my husband's second on
Jessica's, and the opposite on Brad's.
You cannot do an IRA for your daughters. If you do UGTM, there may be
some special programs that don't require the same minimum investments
because children's accounts usually start out small.
Another thing you could do is to buy some stock for each of them that
has a dividend reinvestment program because you can send in small
amounts to add to the investment. I plan to buy things like Disney or
McDonald's once I start doing this for the kids (I already do it for
our retirement savings, and it really does build up fast) so that they
will know the companies they own stock in and maybe get more interested
as they get older.
Best of luck saving. And no matter which way you do it, keep adding a
little at time and the girls will have a nice nestegg when they need
it.
Cathy
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| I recommend two accounts--but you might want to get some things
settled in your mind first, as you may not really believe in
separate accounts.
Consider what you would do if child A needed lots of money for a
non-fun "extra" (like physical therapy to compensate for an illness)
and had used up all of the "A" account. Would you take money from
child B's account for it?
Consider what you would do if child A showed great talent--really
great talent, gold-metal-at-the-Olympics-talent--at something.
Training takes lots of time and money--would you use B's account
after you'd used up A's?
If you would, maybe you should have one account and call it the
"kid" account, or it won't feel fair to B or yourselves.
On the matter of "where", 20th Century has a "GiftTrust" fund which
sets up a trust which owns shares in a mutual fund. You get to pick
when the trust dissolves (when the child is 35 or 50, for example),
but that feature makes the gifts not gifts of "present interest" and
so you must pay gift tax on the gift. GiftTrust has had good growth
in the past, and can do automatic re-investment, etc.. But I suspect
it'd be hard to get money out of it for emergencies. Call or write
20th Century for details.
-John Bishop
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