Conference nyoss1::market_investing

    Zeros due 16-20 years from now are a bad bet, in my humble opinion:
    any significant inflation between now and then would badly reduce 
    their value.  My kids' funding is mostly in equities (ages three-plus
    and two).
    
    There are a lot of notes here and in the archived version about
    college funding, some of which I wrote: I suggest you park the 10K
    in a money-market fund for a month while you read them!
    
    By the way--I assume this isn't the _only_ investment in your child's
    education you're going to make.  So you'll want something you can
    add to later in smaller amounts.
    
    		-John Bishop

RE:0

	I would second John's comments in .1. Your led in comments look very 
much like UGMA/UTMA lingo. We have had a UTMA setup for our kido's for 4 years 
now. If a lump sum of money where to come their way now I would also consider a
2503(c) trust instead of the UTMA. It gives a little for flexability than the 
UGMA/UTMA. Check 2503(c)'s out at your local library.

When our children began working, we had them put 10% of their wages "away".  We
got them invested in a few companies that had Dividend Re-investment plans.
They got a kick out of being part owners, liked seeing their investment grow
every time dividends were awarded and usually enjoyed leafing through the
annual reports; they REALLY liked having the Disney (no longer offers DRP)
stocks.  Through NAIC (explained elsewhere in this conference) you can purchase
stock in a number of companies and as little as one share at a time. Now,
whenever they get a significant chunck of change, they mail a check home with
instructions to invest for them. 

As for what your daughter does with the money when she gets to the "age of
majority"... I generally have a low opinion of gifts_with_strings_attached. 
However, you CAN put the money/investments/whatever in a trust with you as
administrator and set up the trust conditions so that the trust is to be used
for college or, in the event the child does not want to go to college,
distribute the trust assets to her at the age of 25, or whatever. And, of
course, once the trust is set up, you have no further claim on the assets. 

And then, what about another child, later on?  How would a 2nd child feel if
he/she had no such trust, but the 1st child did?

If it were me, and I wanted the money to be used for college, I would keep it 
in an investment portfolio in my name, put it in my will that she gets the 
whole portfolio in the event of my death and then use it to pay for her college 
when the bills come in.  I might not even tell her about it until I pay the 
tuition or give it to her for other reasons.  And, if an unplanned sibling came 
along, I would just use the portfolio to pay for both educations.

As for the zero coupon treasury bonds, why?  They have GREAT security of
principal, but horrible ROI; net taxes, they don't even keep up with inflation.
If ever there was a good example of the maxim "invest only for the long term",
this is it.  Go for equities. Even if you put it all in a S&P index fund, you
have a high probability of realizing a 12%/year ROI over that long a time. 

But then, again, it is your money.


As Always, Just My Opinion.

Dave

    I agree with going equities, not zeros. Choose well established growth
    funds you get equity growth with little interest to worry about. 
    
    Diversify but don't spread too thin. Use Index funds to lower risk if
    you still have doubts.
    
    I'd lock a chunk up in 20th Century Gifttrust. It's doing VERY well
    right now (along with ULTRA) and it's a fund designed specifically
    for this type of planning.
    
    Maybe a Vanguard international index fund to guard against US swings.
    And a high rated corporate bond fund thrown in if you want some 
    stability along with reasonable returns.
    
    But for now, park it, do some reading, make some phone calls to
    different funds (pick up this months Kiplinger's) and ask more questions. 
    
    Bob
    

    While I generally agree with the equity vs. zero coupon advice of the
    last few replies, I would strongly caution you not to put all the money
    into an equity fund or funds at one time.  I would spread it out over a
    2-3 year period to protect yourself from an anticipated market
    correction.  I would also diversify the funds chosen.

    Although I wouldn't buy zero coupon but I would check out EE saving
    bond also.  It is very secure (if that is what you are looking for)
    and is tax free when used for college tuition (depends on your
    growth income).  
    
    Wendy 

    re: .7
    
    I think your explanation of EE bonds is incorrect (either that, or my
    understanding of them is...)
    
    EE bonds pay a variable interest rate, which fluctuates periodically. 
    Bonds held for at least 5 years have a gauranteed minimum; currently
    4%, but 6% early in the year.
    
    So, a bond bought in January this year for a future (5+ year) college
    expense (i.e. tax-exempt interest) would pay at least 6%, roughly
    equivalent to 10% taxable investment (in Mass, assuming 28%+12% for tax
    rates).  A 10% return is pretty good for such a safe investment.
    With a 4% floor these bonds aren't as attrative, unfortunately.

    I have deleted my .7 note until I have my facts absolutely straight
    about EE bonds. 
    
    doug
    

    
    In my deleted note .7, I replied about something I had read on 
EE bonds and drew two conclusions about them: 1) that (IMHO) new EE bonds 
only earn 4% and (even considering the tax benefits) that makes them
less desireable for growing a college fund, and 2) that EE bonds 
are an excellent place to park money for the short term. If held at
least 6 months, they will earn a 4% rate. Over the short haul, that
makes them a better place to put money than <3 year CD's and many 
money market funds. 

Several noters sent mail to me stating that (they believe) I had 
misconceptions about what I read about EE bonds. Not wanting 
to spread mis-information, I deleted my note until I could look up
the source of my information. I visited the library yesterday to get
some mutual fund reports out of Morningstar, and I photo copied the 
Kiplinger's article. I will let everyone decide for themselves 
what the article says. Other opinions are welcome. 

doug



 
The following article was from Kiplinger's, May 1993.
It was in the "Your Family Finances"
(reprinted without permission)


"EE bonds: Still a good deal for short-term savers

     The Treasury yanked the rug out from under one of the best savings
deals around when it dropped the guaranteed minimum rate on U.S 
savings bonds from 6% to 4% on February 27. But because of a little-
known law, the bonds remain a good deal for short-term savers. 
     Series EE bonds held for at least five years currently earn a 
market rate of 5.04%. That's likely to fall to around 4.7% on May 1. 
The 4% minimum rate becomes effective for bonds held more than five 
years only if the market rate (pegged at 85% of five-year Treasury
notes, adjusted every May and November) falls below 4% in the future.
     In addition to chopping the minimum rate, the Treasury changed
the interest formula for bonds held less than five years. Bonds issued
before March 1,1993, earn graduated rates - 4.16% if you hold them 
for six months, 4.27% for a year, 4.78% for 2.5 years, and at least
6% (retroactive for the full holding period) after five years. New 
bonds bought on or after the March 1 earn a flat 4% if held less than
five years.  
     The new short-term rate would probably have gone lower if not for 
the Stark Amendment, a law passed in 1976 that set a 4% minimum on 
savings bond rates. That floor makes the bonds one of the best parking
places around for money you might need during the next two years,
beating money-market funds, one-year CD's and even some 2.5 year CDs
(d.hood- this was in May, and today ... Aug 26... 3 year cd's ar running
about 4%) . You must hold the bonds six months, but then you can cash
them in without penalty if rates go up and better alternatives emerge.
Another edge: EE bonds are free from state and local tax, and interest
builds tax-deferred ....."



 The article goes on to say: "On new EEs, the interest will be credited
on the first of each month no matter how long you hold the bonds, 
so timing is less of an issue. You'll get a bit more interest by
redeeming your bonds at the beginning of the month rather than the end
of the previous month."



 
    

Although the article was accurate in substance, Kiplinger's is still dabbling 
in journalistic overstatement.

US Bonds MAY be the best deal for a short term investor, they may not.  If you
factor in risk, and a short term investor should if they are considering the
bulk of their investment, then US EEs are a good deal due to the guaranty of
capital and interest coupled with a SLIGHTLY higher yield compared to
comparable safe investments.  Also, "short term" to K might be longer than 6
months (required holding time to get reasonable interest of EEs), while "short
term" to someone else may be 2 months or so. 

The next step up the scale of risk may, indeed, be municipal bonds.  Many 
relatively low risk Muni Funds are providing a total ROI (yield + price 
appreciation) around 10%; some offer more, but with a higher risk of price 
appreciation.

As is usually the case in life, sweeping statements (like "All of my friends 
are doing it." ;-} ) are seldom accurate.  What is of overall importance in 
investing, even in short term investing, is to understand what your individual 
goals are and research the alternatives.  You wont lose any money investing in 
EEs; you MAY do better elsewhere.

As Always,  For What It's Worth.....

Dave

    
    As has been stated many times before here, the manner in which you
    set up accounts for your children has both tax AND personal
    considerations.  Now that one of my children has reached 18, I
    truly understand the pitfalls of UGTMA.  Until she was 14, her
    earnings were taxed at my rate, anyway, so I wound up paying income
    taxes for her out of my money - rather than depleting her college
    savings.  Now that she's 18, she's a true 18-year-old and not the serious,
    studious adult I assumed she'd be.
    
    I have visions - or is it nightmares - of her dropping out of college
    and deciding to blow the money on a Porsche or things even I can't
    imagine!
    
    Right now I'm not so concerned about having down the same for my
    younger child.  He's already investing on his own and is the serious
    type.   Of course, hormones haven't checked in yet for him...
    
    Morale of the story:  Give as much thought to control as to tax
    consequences.  Having a 19-year-old dropout blow what took you years
    to save may not be some tax savings.
    

    
    RE: .13
    I believe what you're saying is perfectly natural.   Realistically,
    what IRS laws does your 19 yr old really understand?  What I'm getting
    at is, 99% only understand what you tell them.   What I plan to tell my
    kids is that this is my money.  If you go to college then some of your
    college tuition will be paid out of this pool of money.  If you don't
    go to college this money is still mine.   I plan to handle their tax
    returns, until "my money" is returned.  If say they're working at age
    19 rather than attending college, I'll pay the tax on "my money" and
    they'll pick up their share on their earnings.
    
                 -- Phil

    re: .13
    
    Silver lining...  Even if she does drop out of college,  you still
    have an opportunity to guide/advise/help her do something else.  Maybe
    she (or the two of you together) could do something entrepreneurial
    with the money...
    

    Boy,what an optimist! Last *I* heard,UGMA accounts BELONG to the child.
    If said child decides on doing something with the money other than
    going to college and said child is stubborn,then good luck trying to
    "guide" that child anywhere. It may sound harsh but really the only way
    to guarantee they use the money correctly is to make it clear that you
    will "disown" them if they don't use it according to your wishes.
    
    Ken

    I can believe that I could keep an account secret from my child 
    or sucessfully present it as "my" money--for a few years.  And
    by then it might be all gone.  But....
    
    1.	Your child may catch on, and what will they think then?
    	Do you want your 20-year-old to _know_ you lied to her/him
    	because you didn't trust him/her?
    
    2.	You may have more than one child, and the older ones may
    	inform the younger ones.
    
    3.	You will have to either do all your child's tax forms or risk
    	having them inadvertently commit crimes (failure to report
    	income.  By the way, the tax courts often don't excuse the
    	child for parental failures of this sort, even if the child
    	was a minor.  The WSJ reported on a child whose parents had
    	failed to pay taxes on her money.  She was hit with penalties
    	as well as back taxes and interest.  Tax court didn't forgive
    	the penalties!).
    
    4.	You may well be committing a crime yourself, in not making
    	them aware of this property of theirs as they achieve their
    	majority.  Anyone have laws on UGM stuff to confirm or deny?
    
    		-John Bishop

re: .16

I agree that guiding them may be difficult or unlikely, but I think it's
more positive and less extreme than "disowning" them (or any other such
verbal threat, "cutting them off" etc...)   Besides, the disowning them
threat only works once... 

In my college years, my parents "disowned" me...  "reinstated"me....
"disowned" me again...      ...and "reinstated" me again.

Okay, it worked twice on me...  ;)   But what is a few short words
in a heated child-parent argument can be very traumatic.

It did teach me a very valuable lesson about being self dependent.  It also 
provided a strong example of the golden rule. You know, "the one with the gold 
makes the rules". (facetiousness)  It did not help solve the problem at
hand.  It also permanently ruined my relationship with my Dad.  (I'm not 
saying that would happen in your case).  My advice and request, as the child,
is to please be careful with the "disowning", and the money and control issues.
  

Our situation is a little different.  My in-laws took out
a savings bond in my daughter's name last year when she was
4 and gave them to us.  I don't want them to be in her name
(giving her control) and would like them in our name (or
maybe in my in-laws name).  However, savings bonds rates
have dropped and I can't cash them in without taking a hit.
If it was up to me, I'd take the hit and invest the money
elsewhere (after all, this is for college and it's going
to be at least another dozen years).  However, my in-laws
don't want us to do anything.  Since they gave the money, I
respect their wishes (and will continue to respect their
wishes).

Assuming that someday the money will be put in our names,
I hope my daughter can't come back after she's an adult and
claim that she was coerced to sign over "her" money.

Sure wish they had talked to us first.

P.S.  They also put money for their other grandchildren's
college education in my daughter's name and we have those
bonds as well!

    re:  back a few
    
    I believe the trustee must discuss the UGTM trust with the beneficiary
    on at least an annual basis once the beneficiary turns 14.

    We have an 18 months old son.  We decided to open a Custodial Account
    with our broker for him.  We also decided that every year what ever
    money he gets goes to this account.  for the first
    few years (5-7 years) we will put his money in aggressive/risky stocks.  We
    just bought him 100 shares of Novell (NASDAQ: NOVL) for $18.5/share.
    We did not give any thought on how/what to do if he decided not to go
    to college.  Our Philosophy "Teach him what you THINK/KNOW is right"
    and  the rest is pure LUCK.  So good luck.
                                         
    
    

I have the funds for my kids' college educations in mutual funds, but I keep
the funds in my husband's and my name as I'd rather pay the taxes on the 
money and keep control of it so that I don't have to give it to them when
they turn 18.  If they want to go to college, the money will be there and
will be used for that.  But if they want sports cars, they'll have to get
jobs.  In that event, I think I'll hang on to the money til they are older
and probably give it to them for something like a house payment.  That way,
although they may not get an education from it if they don't want to, they'll
still have something good to show for such an investment over the years.

And we also have a lot of bonds that were given to the kids over the last
2 years. My parents have started to give them bonds instead of just giving
me the cash to buy them a present. But everyone has put the bonds in both
a child's name and a parent's name so that I could conceivably cash the bonds
in if I decided that I could make a better return elsewhere.  Right now, most
of the bonds are the 6% kind, so I'm just hanging on to them.

My current investment strategy with the children is to have $20 a week per
kid taken out of my check and put into a separate DCU account. When I get
$100, I send it in to the mutual fund. That way, it will keep growing and
I'll be able to hopefully get a reasonable return with an eye towards long
term investing. I've gone for a growth and income fund (Scudder) as that
seemed to meet my investment objectives and my taste for risk.

    Maybe "disowning" is too well worn. I know what *would* work in my case
    though: Telling the child that the sum of money and property inherited
    would likely be more than the UGMA funds and I would certainly change
    my will to favor the child that followed my wishes while I was still
    around.
    
    BTW: Both I and my wife would be tremendously surprised if our two
    daughters didn't do exactly as they were told when they reach 18.
    But,then,you never know for sure.
    
    Ken

RE: .23
    
>    BTW: Both I and my wife would be tremendously surprised if our two
>    daughters didn't do exactly as they were told when they reach 18.
      
      How old are your daughters?  My bet is >10 years old.
      
      College  age = ~ 18-21.  Young men and women at this age have lots
      of difficulty in follwong their parents wishes.  I know I did!

      ------------------------------------------------------------------
      
      General comment:  You can look at it this way.
      
          If  one  sets  up  a  "trust", formal or informal, for his/her
          children, then he/she is providing wealth for the child.  
          
          If  one keeps the money directly under one's own control, then
          he/she is providing a way to meet his/er own responsibilities,
          including paying for his/her children's education.

      Neither  is  right  or  wrong;  both are admirable, at least in my
      opinion.  Nevertheless, I would tend to keep the  funds  under  my
      control.

> My in-laws took out
> a savings bond in my daughter's name last year when she was
    Re: parents vs. children and money for their needs. I'm 33, so I can
    see both sides of this one. When we were growing up, my dad socked away
    money for our education. It was in his name, and the expressed
    intention was that he would use it to pay for our college education.
    None of us (four kids) resented that; we all realized that if we didn't
    go to school or drop out, we wouldn't somehow come into a windfall of
    bucks because it wasn't our money. We didn't work for it or otherwise
    earn it.
    
    We all had our own savings accounts too, which my parents started for
    us and helped us maintain. We could theoretically spend it however we
    wanted, but it was strongly suggested that we save it for college
    expenses. Anythging above basic room, board, and tuition at college
    would come out of our pockets, so unless we wanted to go through
    college destitute, we knew not to blow our savings.
    
    That said, I agree with many noters that college students aren't
    necessarily able to handle large sums of money. Two of my best friends,
    very bright and normally responsible people, went several thousand
    dollars in debt right out of college to their newly issued credit
    cards; same story with my brother, only he was able to get a credit
    card while in school. All have now learned to handle money well, but at
    quite a high cost. Then there was my brilliant (I mean it) friend who
    was given $10K by his grandfather on his 21st birthday. He promptly
    lost it all in stock options. So, yes, I think having an adult keep
    control of the funds needed for college is a good idea.
    
    Re: .19, on savings bonds:
    
> 4 and gave them to us.  I don't want them to be in her name
> (giving her control) and would like them in our name (or
> maybe in my in-laws name).
    ...
> Assuming that someday the money will be put in our names,
> I hope my daughter can't come back after she's an adult and
> claim that she was coerced to sign over "her" money.

    This is where I differ. The bonds were taken out in your daughter's
    name, and belong to her, not you. She being four, it is only right that
    you hold them for her, and I'm glad you're following your in-laws'
    wishes on this. I have gifted my nephews and godchildren with savings
    bonds at their baptism, and I would be offended to find out my siblings
    or friends believed the money to be "theirs". I would even prefer that
    they not try to re-invest the money on the children's behalf, because
    this was the investment that I chose for the children.

> P.S.  They also put money for their other grandchildren's
> college education in my daughter's name and we have those
> bonds as well!
    Now *that* is strange. Do your in-laws have an understanding with you,
    or did they just do it and inform you afterwards?
    
    				Jim

Re:  .25

     >> P.S.  They also put money for their other grandchildren's
     >> college education in my daughter's name and we have those
     >> bonds as well!

  >Now *that* is strange. Do your in-laws have an understanding with you,
  >or did they just do it and inform you afterwards?
    
They did it first and then let us know afterwards.

Re:  money in my daughter's name

It was not their intention that this money be my daughter's.
The fact that their intention did not meet reality is due to their
lack of financial acumen.  It's a mess that, hopefully, will not
cause problems down the road (and the longer we leave it as it is
which my in-laws want us to do, the greater chance that it
will be a problem later on.)

Collis

We have a similar situation to the base noter with a slightly different
twist.  My mother-in-law has decided to give my daughter (age 3.5 yrs.)
a gift of $10,000 to help save for college.  My mother-in-law has a
financial advisor who called us to set up a time to meet with us about
this.  My mother-in-law told my husband she wanted us to decide how to 
invest the money.  The advisor came on Monday night and his first
suggestion was to take $3000 and buy a life insurance policy on my
daughter.  The $3000 would fund the policy "forever" and she could take
money out for college when the time came.  He then wanted to know our
financial situation so he could calculate whether we are underinsured
and if we are (I'm sure he'll determine we are) then he suggested buying
life insurance for us which can later be used to fund college.  He did
mention mutual funds and UGMA's but didn't really push that.  I asked 
about setting up a trust and he said the amount ($10000) was too small
to justify the expenses of setting up a trust.  I told him I was uncom-
fortable with the notion of my daughter gaining control of the money at 
age 18--he claimed it was 21 (this would be in Mass.).  Does anyone know
for sure what the age is?

Anyways he is coming back in 10 days.  I don't like his suggestions--
obviously he's more an insurance salesman than a financial planner (his
business card says Northwestern Mutual Life/Baird).  Neither my husband
nor I feel we are getting good, independent advice, but this money is
from my mother-in-law and this is who she trusts.  She has not explicitly
stated we must use him though.  Any advice??  Also, is $10,000 too small
an amount to warrant a trust--we do plan to add to this.  Currently we
have been buying savings bonds for her.

    Sounds bogus to me.  Keep insurance needs and investments as seperate
    things.  There are many better ways to invest a 3 year old's money
    for college than life insurance!
    
    Put the money into a mutual fund with a risk level you feel comfortable
    with.  Personally I like something middle-of-the-road like Fidelity's
    Asset Manager, but there are plenty of reasonable funds for this
    purpose.

    re: .-2  
    
    The age is 21 in Mass for your child to have the rights to a
    UGMA account.  (According to Fidelity rep I happened to ask just
    today).
    
    With 13-14 years to leave the money invested, I'd certainly want to
    invest the money in some form of stock participation. In that sense
    I agree with the comment of .-1, however, I'd be wary of jumping into
    the market (say via Mutual Funds) right now, since there is a chance
    of a selloff about to happen; you could then take advantage of
    investing at much more comfortable prices in very high quality funds
    (read-  good 5-10 year avg. annualized rates of return).  And if you
    "miss" what may have already been a local "bottom", your money will
    still have plenty of time to grow if invested 6 months from now.
    
    re: Mother-in-law sending an "advisor" to you:
    
        This smacks of the parent not completely wanting to give up a sense
        of control over how the money is used; unless, you happen to have
        little knowledge of investment vehicles and she is just trying to
        jump-start you. In any case:
        
        I suggest that the guy you described is not too concerned about 
        your best interests from what he described. If you are not well
        informed about Mutual Funds, I suggest reading up on them first,
        including lots of good suggestions in this conference. I would
        not settle for a fixed level (read low) rate of return on this
        money. The $10K will not build to much at 4-7% rate of return.
    
        Almost any good mutual fund should be able to return 10-16% avg.
        return, even if we assume that the next 10 years are much tougher
        investment climate than the previous 10 have been. (In the last
        10 years, 15-18% annualized rates are common for good funds).
    
        (And, as you  should know, there are many that are NO-LOAD which fill
         these criteria. Fidelity has many. Vanguard Windsor has such a track
         record, and there are many others.) 
    
        You may want some basic knowledge of how these investments work,
        but all you have to do is turn on a talk-radio show on Financial
        Investments to learn which the top funds are - or browse
        Morningstar or the right Business Week/Forbes, etc periodical.
    
        BTW: I'd suggest splitting the 10K into 2 funds (maybe even 3).
             If you think this first 10K is a "test" of your ability to
             invest wisely, go for conservative risk Funds, the first
             year. And beware: this year, if you invest any time before
             a potential drop from here 36xx in  the DOW, (say to 3200)
             you run a risk of a poor first year showing in any investment.
             Right now, I'd put the money in the bank and wait for the
             "right time" to commit it to a fund. You really don't 
             want to see 20% of the principle gone right off the bat.         
             
    
    
    

    .29 said it best:
    
        I suggest that the guy you described is not too concerned about 
        your best interests from what he described.
    
    Here's one datapoint to consider. U.S. zero coupon bonds currently
    yield their peak at about the 18-year maturity. If you bought $10K
    worth of zeroes (say, Benham Target 2010) it would be worth $28K at the
    end of 14 years. At which point the proper retort should be "yes, but
    what will $28K be worth in 14 years -- a Big Mac?" If that bothers you,
    buy a no-load gold mining fund such as Benham Gold Index, for some
    small amount like $1K. If the dollar depreciates, the gold fund will
    spectacularly offset your loss on the "value" of the $28K.
    
    If $28K sounds like not enough (and it may not be) remember this: for
    higher return you WILL have to take risk. There are widely varying
    opinions about the future of the economy and the stock market, and
    these are already much debated elsewhere. You have to decide how you
    will manage that risk, not whether you can avoid it.
    
    - Don't buy any insurance with this money
    - Don't invest in load funds sold by salesmen (even if they call
      themselves "financial advisors")
    - Remember "Guaranteed" does not mean a thing if the guarantor 
      goes bankrupt
    - Prediction: the next 15 years will NOT be like the last 15 years;
      try not to invest via the rear view mirror
    
    All in all, though, a pretty nice problem to have.
    
        John

Here is my situation for what it's worth since I am by no means
an experienced investor.
- I have had 3 finanical advisors, from different firms, over my
  house. All they want to do is sell insurance. They tell me 10 x
  my salary is a rule of thumb. I don't know about you but I have
  neither heard that before nor do I think it is necessary. I booted
  them all out especially after they told me I didn't have the
  "me first attitude" even though I put aside >20% of my pay each week
  into STOCK, SAVE, LIFE INSURANCE and DCU.
- I do think life insurance is very important and I have my whole family
  insured to the max that the digital plan allows. Plus my wife and I
  have separate universal life policies with METPAY = to the mortgage
  on the house. This can be cashed in and used for college tuition.
  All in all I myself am insured for approx 6-7 times salary.
- I have two children ages 2 & 4 and all thier gift money has been
  put aside for them. I kept a small portion of that money in thier
  separate bank accounts and opened up a mutual fund UGMA account
  for each one. 1 account is the Fidelity Growth and Income and
  the other is Fidelity Equity Income.
- The most important factor in this equation is that you must be in
  it for the long run because there will be peaks and valleys in the
  value of thier portfolio and you must not panic and pull out. With
  number of years you will have your money invested you may as well
  take some risk and make the money work a little harder for you.
  How much risk is up to you.
- As for myself and the wife: we contribute to stocks, SAVE, and the DCU.
  Also knowing we are in this for the long run we just (last week)bought
  into our own Fidelity mutual fund even though the market dropped so much.
  We're playing the riskier game of emerging markets.
- This is how I feel...Both children started with equal money and both
  will end with equal money. I will do what I feel is right by spreading
  the money out and investing it for the "long term". Yeah I took a
  drop in this last market correction and over the next 15 years there
  will be more. But over this period I expect to make a much higher
  return than the 4-6% the life insurance is offering.

Consider all the money as the Families and spread the wealth:
IMHO 1)Cash  2)Life Insurance  3) Stocks(Mutual Funds)  4) Equity (home)

Being 32 with lots of years to go I can afford to be a little riskier.
Do lots of reading. The Fidelity's and INVESCO's of the world will mail
you all you want to read about. Just call and ask.

For what it's worth.

    Some of the previous replies recommend mutual funds, but, perhaps, not
    right now.  Since they don't know for sure about further market
    correction, my recommendation would be to put the $10K into mutual
    funds over time, say, 2 years.  You can learn as you go and not put all
    your eggs in one basket at one time.
    

    Hi,
    	Talk to me about Uniform Gifts to Minors, please! We have a shiny
    new 10-week-old daughter for whom we would like to Do The Right Thing.
    We have already talked to one "investment counsellor" who turned out to
    be an insurance agent hawking Variable Universal Life; we showed him
    the door.
    	- how do I set up a UGMA account?
    	- at what rate is it taxable? Mine, or the baby's?
    	- what are our investment options within the account?
    	- tax advantages?
    	- access restrictions and other cautions?
    	- what is the age in Maryland at which she gets control?
    We are mainly interested in investing for college and maybe a little
    start-up money once she graduates. Is there any available literature
    which gives a good picture of UGMA's?
    			thanks,
    				Jim
    

    What follows is a personal view; opinion.  It is my interpretation and
    understanding of the situation.  For a more accurate assessment, please
    consult a professional.


    We have UGMA's set up for our two kids and have (until recently) been
    contributing to them, with college in mind, since birth ('85).  I now
    regret the decision to set the accounts up this way.

    	1. The accounts are taxable at the parents rate (after, I think,
    	   the first $600 (?)) until they reach age 14.  One way to get
    	   around this is to invest in something that allows you to defer
    	   the interest until withdrawal (like US savings Bonds, which
    	   used to be a fantastic deal, but are less-so now).  Of course,
    	   you then loose the $600 exclusion each year.  A spread sheet
    	   is helpful for analysis.

    	2. The funds legally belong to the child.  In MA, they must be
    	   transferred 100% (no strings attached) at age 18.  When I
    	   opened these accounts I was told by "someone" that the age
    	   was 21 (a very commonly held mis-truth) - this turned 
    	   out not to be true.  Don't trust hearsay on this - check
    	   the legal reference.  This bothers me a bit.
    	   I have college in mind.  If my then-18-year-old has something
    	   more frivolous in mind, I'd rather use the $$ for more
    	   selfish pursuits.

    	3. In an emergency (e.g. job loss, subsequent mortgage default,
    	   etc.) you cannot (legally) use this money.  Nor, can you
    	   (legally) get the minor to "give it back" to you.

    The laws are clear on these matters.  Many people decide to keep the
    accounts secret from the minor (also illegal).  In these cases, you are
    likely to lose a law suit, if one is ever brought against you.

    	4. When college time does come, you may want/need to apply
    	   for additional assistance.  In this matter, the income in the
    	   child's name is looked at first, and must be "spent down"
    	   prior to assessing the family's ability, needs, assets, etc.

    I summarize my feelings:

    	- The tax advantage is relatively small for UGMA's
    	- You have no control how these funds will ultimately be spent
    	- The funds are ill-liquid and can't be used for any family
    	  emergencies
    	- They hurt your chances to get additional college aid


    Better late than never, I have now stopped contributing further to
    these UGMAs and am making further contributions to set-aside
    investments in the parent's names.

    L.

    I agree with the previous response, and that's why the money being set
    aside for my 3-year-old twins is in my husband's and my name.  I felt
    that the tax consequences of doing it this way were minimal compared to
    giving them control of what I hope will be a large chunk of money when
    they turn 18.
    
    I know that UGMA money is owned by the child, and so that puts some
    kinds of restrictions on what you can do with the money, though I don't
    have all the details. But from what I remember, you can't take as much
    risk with the child's money as you could with your own.  And what
    happens if you need it for something as the previous noter mentioned? 
    I'd rather put food on the table now than save the money for college
    later if that's a choice that's forced on me.
    
    I think you can get a lot of details on UGMA from a bank who should
    have some paperwork on them. I imagine the IRS would also have some
    publications on them that describes the tax consequences.  I know a lot
    of people like them, so you'll have to look at all the data and make up
    your own mind about what's best in your situation.

    Many people already have UGMA's set up. If one believes in the points
    raised in .34, then it might be a good idea to come up with ways to
    spend down the UGMA to the extent legally possible, well before college
    aid applicatons are due. 
    
    
    Can those who have some knowledge on this comment on what is thought to
    be a legimate use of such funds ?
    
    For example,
    
      a vacation to another country -- legitimate educational expense ?
    
       (and if so, and parents accompany a minor, how much of the funds
        would be deductible for such purpose ?)
    
      fees for a summer "learning" camp ?
    
      a computer, for child's educational purposes ?
    
      and so on.
    

re: .33

        First, congratulations on your daughter!!

        For recent a reference on this, the February (+/- 1 month)
issue of Kiplinger's Personal Finance Magazine had an article on
this.  It gives lots of pros and cons, including many of the good
points made in .34.

        18 years is a long time to see ahead.  My son just turned
17 months, and we decided against an UGMA after reading the KPFM
article and considering all of the risks (many) and benefits (few).

-Austin W

    Another factor is college expenses.  A larger portion of the child's
    savings is calculated to be eligible for college expenses than the
    parents.
    
    
    Bill

    I agree with what .34 said. For us, we just set up an account in my and
    my wife's names. We know the money is for our child. But, we want to
    have the full control on it.
    
    According to our MF company, if one's UGMA account has less than $3K (I
    think that's the magic number - if I remember it corrrectly). He/she
    can just close the account and not worrying about reporting it to the
    IRS or anyone else. Now, I have not checked how true this is with any
    attorneys. Because, I did not have any need to.
    
    Mike