Best way to invest money for children?

[johnnydingles]

I have approximately $5000 saved up for my son who is 4 years old. It is just money I throw in a jar for him and save it up. What is the best secure way to make the money grow for his future. I am Canadian, so keep that in mind for your advice. I don't think I want to do a government college kind of fund where there is a penalty for not going, i just want to most growth for the money that he can choose to do what wants with it at 18. Any suggestions? Thanks

[Sniper]

[ QUOTE ]
I have approximately $5000 saved up for my son who is 4 years old. It is just money I throw in a jar for him and save it up.

[/ QUOTE ]

Throw the money into an index fund instead of a jar, and keep doing it every month /images/graemlins/wink.gif

If you keep throwing about $100/month into that fund, he'll be quite happy when he turns 18 /images/graemlins/smile.gif

[Dariel86]

I'd say very happy /images/graemlins/wink.gif

[johnnydingles]

Thats why I am asking, I put the money into a regular saving account and it keeps growing so I want to make sure I get some interest on it. I know absolutely zero about investing. How much return does an index fund usually return? Thanks for the help

[vindikation]

[ QUOTE ]
Thats why I am asking, I put the money into a regular saving account and it keeps growing so I want to make sure I get some interest on it. I know absolutely zero about investing. How much return does an index fund usually return? Thanks for the help

[/ QUOTE ]

Ok I'm probably the least qualified of anyone here to answer this, but I've been doing a lot of research over the past 3 weeks so here it goes.

An index fund is a mutual fund that tries to match what the stock market does. So the "average" stock market growth rate is around 8-9% a year. It may be up or down depeneding on the year, but over the course of many, many years this is the average. Because you are depositing money into your son's account and won't be touching it for many years, an index fund has a good chance of returning a higher rate than a savings or money market account (around 2-4%).

[Sniper]

At 2%/yr in a savings account, he'll have around 25,000.
At 10%/yr possible in the stock market, he'll have 56,000.
If you were able to average 15%/yr in the market, he'd have almost 100K at 18 /images/graemlins/smile.gif

Isn't it worth the time to figure out how you can easily get 15%/yr or more?

[vindikation]

[ QUOTE ]
Isn't it worth the time to figure out how you can easily get 15%/yr or more?

[/ QUOTE ]

So are you saying it is easy to get a 15% return from the stock market?

[johnnydingles]

[ QUOTE ]
At 2%/yr in a savings account, he'll have around 25,000.
At 10%/yr possible in the stock market, he'll have 56,000.
If you were able to average 15%/yr in the market, he'd have almost 100K at 18 /images/graemlins/smile.gif

Isn't it worth the time to figure out how you can easily get 15%/yr or more?

[/ QUOTE ]

I do want to figure out how to get the best return, thats why i am asking and starting here. Any tips on some books or websites to start at?

[MrMon]

Giving large chunk of money to 18 year-old boy with no strings attached = bad idea.

If you want any control, keep it in your name. You can turn it all over when he gets married or turns 30.

[Sniper]

[ QUOTE ]
So are you saying it is easy to get a 15% return from the stock market?

[/ QUOTE ]

It's fairly easy for an individual stock market investor, yes. Take a look at the long term buy/hold of a small cap index vs SP500. Add in some market timing. Its not that difficult to figure out, you just have to be willing to invest the time to educate yourself.

Most people aren't willing to invest the time!

[Ray Zee]

use it to buy a family vacation cabin. improve it over the years and you all get to enjoy it and someday it will be worth megabucks.