Thursday, December 8, 2011

What kind of financial account should I start for my daughter?

I am wanting to start a savings account for my 2 year old daughter, but I'd like something with higher interest than your average savings account. I considered getting a CD, but you aren't able to continue to add to it for the designated time (6 months, year, whatever).





Is there some kind of account that is maybe more obscure that I just don't know about?|||Roth IRA.





Also, look into getting 'whole life insurance' while she's young. She could have up to $1M waiting around for her (and, not to mention life insurance) and contribute as little as $20/mo. Make sure it's whole life insurance or an endowment, not term life like you see on TV. Whole life/endowments work like savings accounts too, term does not (and expires at a certain age, not death; so you may have paid for nothing). Endowments pay out at X age, whole life at 100 (but still has a big part of the $1M etc growing along).|||Here are two ideas.





1. obscure idea - ibonds, these are US treasury bonds you can by them to the penny. If you have $38.19 you can by an ibond for that exact amount. You can do it electronically over the internet from the Treasury website. Their current interest rate is around 5.75% and this is generally not taxable on the fed and state levels if it is used for college.





2. Universal Life insurance would also be an excellent choice. You could get it started for $20 to 30 per month (do not let it endow). Your daughter would have a growing account that she could tap for school, take over premiums at an agreed upon age, or use as a part of her own retirement/financial planning. She can adjust the face amount or the premium with the insurer through the years to meet her needs. If it is indexed (recommended) it will grow with the market and the best polices do not lose when the market does.

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