How to Invest in Your Children's Name

There are as many reasons to invest in a child’s name as there are parents. New parents may want to be sure they have enough money stashed away to pay for their child’s college education. Parents of teens who are about to start their first job may wish to teach them how to invest as an integral part of learning handle their money. Of course, taxes also play a huge part in the discussion. Whatever the objective, most would agree that investing in your child’s name is an investment in the future.

Things You'll Need

• Social Security Number for your Child
• Relationship with a Qualified Brokerage Firm or Financial Institution
• Funds to Invest

Instructions

How to Invest in Your Children's Names

1. Determine your purpose for investing in your child’s name. The objective will determine what type of investment is best suited to your purpose. Saving for college may best be accomplished by establishing a Qualified Tuition Program 529 Plan. Investing to avoid or defer taxes may best be accomplished through an Individual Retirement Account, which is only available if the child has earned income.

2. Determine to start investing in your child’s name now. Time is the investor’s greatest ally. Determine to invest a set amount at regular intervals, and increase this amount as you are able. The benefits from dollar cost averaging allows you to buy more shares when the price is low and fewer shares when the price is high resulting in an overall averaging of the cost of your investments while eliminating the urge to try to ‘time’ the market.

3. Get your child involved in the process as soon as they are able to understand even a little about it. Let them see the results of the investments that are in their name periodically. Use the process as an opportunity to teach them how different kinds of investments work and value of long-term investments, savings, and living within your means.

4. Establish a custodial account for your child with a qualified brokerage firm or financial institution. Make any investments in your child’s name through this custodial account. You may have more than one custodial account, but there can be only one minor and one custodian per account.