AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question Hello and thank you for your time. Our son is 1 year old and we want to start saving money for him when he graduates high school, hopefully for college. Thus far we have saved $700 dollars for him and placed it in a youth savings account that is earning next to zero for interest. How can we continue to save money for him that earns more return? It needs to be risk free, no stock market or mutual funds. I would also like to have the returns tax sheltered if possible. My thoughts are to spread his money across CD's, money market accounts, and maybe in some gold/silver coins yet these carry a risk so not sure. If we go the CD's and money market accounts, is the interest earned under his name/SS# therefore not likely to reach the income threshold for even filing a return and in a roundabout way tax sheltered?
Thank you,
Joe
Answer Hi. If you are looking to save for college then I would consider a college savings plan such as a 529 or pre-paid tution. Each state has their own plan which may provide certain advantages for residents so I would explore this first. www.savingforcollege.com is a good website to learn more. In regards to how to invest, for risk free (and consequently low returns) the CD's and money markets will be your safest bet. As you mentioned, the problem right now is that they pay so little but that is the tradeoff for risk free these days. If you are willing to take on a little extra risk then achieving a higher return becomes a better possibility and your options open up. I hope this helps.
