I want to financially secure my kids. So I am planning to make some investments on behalf of them, so that they can access the funds when they are over 18 years of age. I was looking for some information on this online and I read this, http://www.billfixer.com/investment/investing-for-your-children-what-you-need-to-know/. It is said that you need to keep certain things in mind while choosing to invest for your child. One of the advantages of saving early is the ability to leverage the power of compounding, but the problem is that there might be penalty taxes imposed on minors. I am in a confused situation right now. What is the right decision? How about Education Savings Plan? I want expert suggestions on this. Please help.
You should sit with a financial advisor in person. Seeking advice online on something like this which is clearly important to you isn’t a good idea - not because you won’t get good advice, but because it might not be the best advice for YOUR specific needs. It’s almost impossible to say anything credible here without additional information (income, investing period, saving purpose (college vs general), etc). In general: follow good principles for saving for the future. This means avoid wasteful spending, pay yourself first by setting aside funds to save and put that in index funds that track the broad market, and forget about it in the long-run.
“For instance, some plans allow you to save for your child’s higher education, specifically. But in the event that your child decides against seeking higher education, the plan will only refund the initial contributions that you made, minus the fees and compounded earnings.”
This can’t be right. 529 plans, for instance tax you on the earnings. Not refunding any earnings is crazy.
I’m pretty sure that’s what the article meant. It should have also stated (maybe it did…I didn’t read it) that you can transfer the 529 money to pretty much any relative or use it yourself to go to culinary school or something.
“minus compounded earnings”? They have a creative use of alternate definitions then. Anyway, I agree that given the level of OP’s investment experience, it will be useful to consult with a financial advisor to discuss the most common approaches. Just don’t commit any capital before doing your own research.