Best investment for 11 yrs old's $2500

[MOXJO7282]

My daughter has saved $2500 by herself. I have tried to let her manage it herself within reason, but recently realized it is just sitting in a checking acct gaining no interest. I was told most funds require $5k deposit to get a decent rate.

Is this true, can anyone recommend a fund to put this money in? I would really like to use this example as a finaicial learning experience for my daughter, so any help would be appreciated.

Regards.
Joe

 

[Dave M]

Actually, many funds have minimums as low as $1,000. Try Fidelity, where most stock funds have a minimum investment of $2,500. Her rate of return will be the same as for someone putting $500,000 into the same fund that she decides upon.

 

[KauaiMark]

I'd suggest buying 100 shares in Tootsie Roll (NYSE: TR)

Very solid, conservative stock that pays a combined cash (1%) AND stock dividend (3%) of for a total of about 4% every year. Great example of the power of compounding gains over time.

ScottTrade.com has low minimum ($500) and no maint fee's (sounds better than a timeshare!)

...Mark

 

[Diane]

I second Fidelity. Just putting the money in its money market account, as distinguished from a fund, will earn almost 5% interest. She can do the same thing with Charles Scwab. No need for her to have to get into deciding which fund until she gets more experience and skill. If she gets into buying CD's online Schwab is much easier to use and with better information. If she gets in buying treasuries Fidelity is much better and easier to use.

Diane

 

[EAM]

Schwab and Fidelity both have $2500 minimums for opening a Uniform Transfers to Minors Act (UTMA) custodial account.

Perhaps someone with more tax knowledge than I have could describe the pros and cons of the various sorts of accounts for minors such as UTMA, section 529, education savings, etc.

 

[gmarine]

My daughter has saved $2500 by herself. I have tried to let her manage it herself within reason, but recently realized it is just sitting in a checking acct gaining no interest. I was told most funds require $5k deposit to get a decent rate.

Is this true, can anyone recommend a fund to put this money in? I would really like to use this example as a finaicial learning experience for my daughter, so any help would be appreciated.

Regards.
Joe

Consider NY States 529 college savings plan. It offers good investment choices and any money put in is state tax deductible for the the owner of the account (you and/or your wife).
http://nysaves.uii.upromise.com/

If you are looking for a simple savings account try
www.ingdirect.com. No minimums and no fees with a current savings rate of around 4.3%.

 

[lawren2]

Citibank is offering 6 month CD rates at 5.25%

 

[fnewman]

IMHO, the best 'investment' would be to work with the child to research the possibilities and jointly decide how to proceed. The Vanguard.com website is one of the most highly rated sites for educational materials.

 

[MOXJO7282]

IMHO, the best 'investment' would be to work with the child to research the possibilities and jointly decide how to proceed. The Vanguard.com website is one of the most highly rated sites for educational materials.

This is what I was looking to do. Thanks for all the great advice.

Regards.
Joe

 

[MULTIZ321]

Joe,

As you go about your joint search, two financial sites that have useful comparitive information, including minimum investment amounts are:
www.imoneynet.com

and
www.bankrate.com
At the bankrate homepage, click on the "Checking&Savings" Tab toward the top of the page - that will lead you to more info of interest.

The imoneynet.com site is a combination free info/cost info site. If you scroll down on their homepage you find Weekly MMF Ranking Links.

Richard

 

[pwrshift]

I would keep the money out of real estate or equity funds as there are warnings of serious problems ahead. My choice would be Everbank's market safe Commodity Index CD where the investment can be as low as $1500 and the capital is protected. If the expected bull market in commodities happens the yield could be excellent over the next 3 years. You can probably get good info from www.everbank.com if interested.

Brian

 

[jerseygirl]

I used to travel to local high schools as part of my company's sponsorship of the Stock Market Game. The kids (slightly older than your daughter) always loved my Louie the Loser presentation. My material is out of date ... but the story is still valid: Starting in 1994, Louie put $10,000 in Investment Company of America each year on the worst day of the year (market high). At the end of 2003, he had invested $200K and his account was worth $716,555. Had he picked the best day of the year (market low), his account would have been worth $877,896. Moral of the Story Part One: Find a growth fund with a solid rate of return over a long period of time and stick with it. Moral of the Story Part Two: Don't try to time the market -- it's just not important over the long term. The best thing you can teach your daughter is the importance of long-term commitment and patience!

Important Disclosure: Past results are not predictive of future results.

 

[KenK]

I think an idea might be to start a family investment club. This site shows how to obtain stocks at very low costs....(ie- tootsie roll-) via DRIPs (many companies still offer direct investments with no fees but some miniums dollar totals) or via the 'Low Cost' investment programs.

http://www.betterinvesting.org/youthinvesting/

Suggest tracking programs to help with different totals invested by each family member (just like the Investment Clubs do.

If I can get onto the Association of American Investors (?) website, they used to have a free listing of the more than 3500 companies that offered DRIPs with those charging fees or amount of stock needed to start to those with no fees or prior ownership needed.

I just checked Tootsies' site....very little investor relations info. I checked the site of Johnson Controls, and they have a page that might give you an idea on how to buy the stock with 10 set up account fee and low cost sell fee: (Some have no fees...but due to the higher wages demanded by yhe many CEOs, that has been changing

http://www.johnsoncontrols.com/financial/purchase_plan.htm

I think P & G , RPM , DBD , ChevronTexaco, Wrigleys, and many other companies still offer them.....but I don't know those stock ratings.

The lists are not free anymore on the internet, because no one makes any $$ giving out this info. (And it does change with corp policy)

 

[spike]

This may sound a little strange and contrary to the other advice here. I don't think you should invest for return! Instead invest for fun and education! Let you child pick a stock in a fund or subject she likes. It may be Disney, or McDonalds or Nike or a fashion stock. Whatever floats her boat. Make it FUN.

Then teach her to track the stock and learn the FUN of investing. Did she beat the market? How can she tell? Let her chart it on a graph. With color pens. Should she sell? Why? Buy more? Can she compare her return to the bank? What does the color graph tell her?

Returns will come, but the joy of investing is the best gift you can give her.

 

[EAM]

The family investment club is a good one if your family has the time and inclination to do the necessary homework. I would have liked to have tried this with my sons, but neither one was interested.

The Better Investing site also offers a good book for teaching young people about investing: http://betterinvesting.stores.yahoo.net/st1400.html

It starts out discussing goal-setting in general and then how to plan to reach one's goals.

Also, Better Investing offers a number of tools for evaluating stocks. Perhaps she could select some stocks for companies of interest to her, and learn how to analyze them before deciding which to buy.

Also, there may be some advantages to buying smaller amounts of stocks or mutual funds each month, rather than investing everything at once. Diversification is usually a good idea, too.

 

[Jan]

My kids were about that age in the early 80's. The family kicked in a total of $500 and they picked Alaska Airlines to invest at $4 a share. The price upped and split and upped and maybe even split again and the next year we cashed in and went to Hawaii We lived in Washington State at the time. Moral of the story--the kids are now in their 30's, wise investors and got the love bug of travel early on in life.
Jan
Oh--and the kids would run daily for the paper to check out how their stock was doing. Learned that at a young age also.

 

[MULTIZ321]

To add to Ken's comments on DRIP's -

To learn more about DRIP's check out the MoneyPaper.Inc


For DRIP Company plans with No Fees to the Investor
This link also shows the minimum number of shares needed to qualify

To View all Drip Companies

Richard

 

[nursenancy]

T.RowePrice has a UTMA account with a minimum of $1000. I just opened one for each of my children.

 

[beachsands]

Instead invest for fun and education! Let you child pick a stock in a fund or subject she likes. It may be Disney, or McDonalds or Nike or a fashion stock. Whatever floats her boat. Make it FUN.

Then teach her to track the stock and learn the FUN of investing. Did she beat the market? How can she tell? Let her chart it on a graph. With color pens. Should she sell? Why? Buy more? Can she compare her return to the bank? What does the color graph tell her?

Returns will come, but the joy of investing is the best gift you can give her.

If you invest in FUN (NYSE: FUN) You will indeed be buying a good time.
FUN is the stock symbol for Cedar Fair, LP the parent company of Cedar Point, the amusement park.

Cedar Fair’s seven amusement parks are Cedar Point, located on Lake Erie between Cleveland and Toledo; Knott’s Berry Farm near Los Angeles in Buena Park, California; Dorney Park & Wildwater Kingdom near Allentown, Pennsylvania; Valleyfair near Minneapolis/St. Paul, Minnesota; Worlds of Fun, located in Kansas City, Missouri; Geauga Lake & Wildwater Kingdom near Cleveland, Ohio; and Michigan’s Adventure near Muskegon, Michigan. The Partnership’s water parks are located near San Diego and in Palm Springs, California, and adjacent to Cedar Point, Knott’s Berry Farm and Worlds of Fun. Cedar Fair also owns and operates the Castaway Bay Indoor Waterpark Resort in Sandusky, Ohio. Cedar Fair’s flagship park, Cedar Point, has been voted the “Best Amusement Park in the World” for eight consecutive years in a prestigious annual poll conducted by Amusement Today newspaper.

SANDUSKY, OHIO, May 22, 2006 -- Cedar Fair, L.P. (NYSE: FUN), a publicly traded partnership which owns and operates seven amusement parks and five water parks, today announced that it has signed a definitive agreement for the acquisition of the Paramount Parks. Cedar Fair, L.P. will acquire the stock of Paramount Parks, Inc., a wholly owned subsidiary of CBS Corporation (NYSE: CBS) (NYSE: CBSA) for a cash purchase price of $1.24 billion.

The five Paramount Parks consist of Canada’s Wonderland near Toronto, Canada; King’s Island near Cincinnati, Ohio; King’s Dominion near Richmond, Virginia; Carowinds near Charlotte, North Carolina; and Great America located in Santa Clara, California.


Just for FUN


Joel

 

[BocaBum99]

I'd suggest buying 100 shares in Tootsie Roll (NYSE: TR)

Very solid, conservative stock that pays a combined cash (1%) AND stock dividend (3%) of for a total of about 4% every year. Great example of the power of compounding gains over time.

ScottTrade.com has low minimum ($500) and no maint fee's (sounds better than a timeshare!)

...Mark

A better investment would be to buy $2500 worth of Tootsie Rolls at Costco and sell them at School. She will net more than $5000 in less than a month. Now that is a return on investment.

 

[Maverick1963]

First, congraulations on your daughter's saving. It is awesome that she saved $2500 at the age of 11. Once I worked for a securities company and promoted investement as marketing communications manager. If she can let the money sleep more than 10 years, I recommend buying Dow Index Fund (fund or ETF) or it could be Nikkei 225 at this time. Index fund charges lower costs for investment management. If you think Dow is too high, another option is a global stock index fund (globally invested to match an index like MSCI). As you may know, stock volatility is high in a very short term. But in the long run, it becomes low and stock gives you the best return. If she needs the money in a few years, it should go to bank account, money market fund or Federal Bond with an appropriate maturity date. At the age of 11, it could be very interesting for you and your daughter to go to a financial service company and to listen to advice from a professional. I wish you the best luck for your daughter.

 

[KenK]

Did she earn the money? (Of course she did ) Getting back to that investment club idea with drips (or any investment)....why not put it into a ROTH type IRA ? No Tax.....ever

I know...someone may say she can't do that....but its a consideration. Can you imagine 50 years of growth without having to pay taxes? Let her find other $$$ for college.

I think I know a few stocks you can buy direct that will be directed into an IRA ROTH. Check ATO. Only problem, I don't know how good it is. (It's a gas type company) But you need not go through any brokerage or institution...might save some fees.