Thursday, May 17, 2007

Investing For Our Daughter

We currently have two savings accounts for our daughter: a Uniform Transfer to Minors Act (UTMA) account and a 529 Plan account.

In the UTMA, we purchased a 5.1% CD due on 9/15/2008. The UTMA account is designed to fund her weekly allowances until she is 18, at an amount equal to two times her age. Thus, I want to have a "guaranteed" return on the money. Of course, the risk is that 16 months from now, I won't be able to get 5% interest any longer.

Since the 529 plan is for college tuition, we won't need any funds for 16 years. Therefore, this account is invested in the stock market. We have invested 25% in each of the following funds:

Vanguard Fund
YTD Return
as of 5/14/07
Aggressive Growth Index Portfolio
500 Index
Extended Market Index
Developed Markets International Stock Index

The S&P 500 had a 6.55% YTD return as of 5/14/07.

To date, I am pleased with the investment performance of both accounts. Currently, a 2 year treasury bill is paying 4.73% versus 5.1% that I got for the CD. In the 529 plan, all the mutual funds are matching or beating the S&P 500 returns and averaging 7.9% YTD which is exceeding the 8% annualized return that we need.

For more on Crossing Generations , check back every Thursday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC


Minimum Wage said...

Ah, starting out with a silver spoon. Is this a great country or what?

Dimes said...

Can't post on the "die broke" entry, but heck, there will be a lot of people dying broke WITHOUT transferring wealth ;-)

Super Saver said...

Minimum Wage,

Thanks for our commment.

I'd like to think of it of giving her a good foundation: An allowance to learn about personal finance and a college education with zero debt. I wouldn't want her to depend on her parents her entire life.



Thanks for letting me know about the "no comments allowed." I've corrected the issue. Seems that Blogger has randomly disallowed the comment functionality on posts that are in draft.

Janie Hickok Siess, Esq. said...

Thanks for participating in the Carnival of Family Life this week. Your post is a great contribution to the Carnival!

Holly Schwendiman said...

I think it's great that your teaching by example the importance of saving money as well as helping others with it. I'm not sure what the balance is for my own kids' responsibilities financially and mine in helping provide for them but I think being aware is 99% of the battle. Thanks for sharing the thought provoker. ;)

Here via the Carnival of Family Life. ;)