Olivia's grandparents gave us some money for her birthday with specific instructions to start a savings account or trust fund in her name. I am familiar with how a savings account works but am pretty clueless when it comes to trust funds. Any advice or tips out there? We have $300 to start with. Thanks!
I recommend that you look into opening an account with ING Direct. ING tends to have better interest rates and you can easily roll funds over to CD's. Also, you can do everything online so there is no need for a trip to the bank.
Hannah- Cds are a great short term investment (although rates are a little low right now) So let's say you intested in a 5-year CD at 2% ( I dont know what the rates are right now, Im guessing). But anyways, if the rates go up in 3 years, you are still stuck in that 2% rate).
You can invest in mutual funds (that can be invested in the market and can get a much better return). Mutual funds sometimes have a minimum number of years you need to stay in it before pulling out without penalty. But like I said you can see some great, long-term returns, given you are willing to take a little risk- as the market can fluctuate.
Another option would be to invest the money in a 529 account (college savings account). The money you put in can be used later for college expenses etc, and will accrue interest while waiting)The money can be taken out tax free. But there are limitations here.
Another option are purchasing Bonds.
Check out our OC Mommies Sponsor, Tony Hanlin with Independant Capital. http://www.ocmommies.com/profiles/blogs/saving-for-retirement-and-a
Im sure if you shot him an email and asked the best route to taken, he would get you started on the right foot
Also, we have an OC Mommies sponsor
Another option is a life insurance policy for the child. We had been putting money aside for our daughter starting when she was born (also in an ING account actually), and then when we finally got a chance to talk to a financial advisor, he suggested an insurance policy for her. It is incredibly inexpensive when they're young, so if you decide to pay a set amount, the amount over the cost of insurance is just yours to withdraw. Let's say the insurance is $10/month, if you put $40 a month in, the $30 will grow like an investment but you can pull it out whenever you want for whatever you want. Plus, the account pays dividends (depending on the company - we went with Northwestern Mutual). The best part is that while it grows similar to a 529, you don't have the restrictions as to withdrawing the money for college expenses... if, say, your little one gets a full scholarship somewhere... or becomes a professional athlete at 11 ;) Plus, the cost of the insurance will never increase as long as you pay the premium - so you locked in the rates for a newborn or toddler for life. I think 529 may be tax free though, this isn't.
I'm sure an advisor could explain it better and in more detail, but I was surprised it was even an option.
Have you looked into 529 education accounts. We also got money for Keeley that was earmarked for her college fund. We already had accounts and financial advisor through Schwab, so we contacted him and he sent us a packet on the different types of accounts.
We ended up doing the account for college education, but they have options for private schools as well and simple trusts. Also, Schwab accounts have still performed reasonably well in the current economic climate.