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[ISUAlum05]

You said your husband owns his own business? - this is perfect. Get them on the payroll as early as you can, pay them a normal wage (not favorable), and use that income to invest in a Roth IRA.

Buying funds outside the Roth might be a good idea too, if they want to use that for a house down payment, starting a business, etc...but I would definitely let compound interest work for their retirement as early as possible.

I did not know we could open an IRA for a child. Thanks! I probably can't make a 2 year old on the payroll look legit though, huh?

 

[carvers4math]

It is a good way to contribute to nieces, nephews, grandkids, etc. Gets hard to buy stuff when kids seem to have everything.

 

[bawbie]

yes it does.

The doomsday scenario would actually be if your kid was dumber than a rock and couldn't get in to college because then you'd also have a 10% penalty lopped on top of it (unless you had other children to transfer it to)

Or, I think, you can leave it and Timmy can pass it on to future grandchildren.

 

[boone7247]

I did not know we could open an IRA for a child. Thanks! I probably can't make a 2 year old on the payroll look legit though, huh?

Sure you can. Take a picture and use it in an ad, or mailer to his customer/clients. Had a class once where the teacher actually hired his kids to do the company voicemail prompts. did the research for what that would cost to do for a professional and paid them that. You can come up with lots of ways to find a reason to pay your kid a wage.

 

[khardbored]

Please correct me if I'm off, I don't have one, but aren't you limited on what investments you can put the money into?

Not really. I think they have a good selection of choice of investments with low cost.

You can choose from their investment portfolio of funds based on risk assessment (agressive growht through bonds & money market) and/or have it reconfigure automatically over time on their age-based savings track.

Here is Iowa's website:
https://www.collegesavingsiowa.com/content/home.html

That reminds me why I didn't have one, that and the non fed deuction. I haven't been the biggest vanguard fan.

I have kept everything outside in open cash

If you don't like Iowa's plan, invest in any other state's plan. They all allow for tax-free growth and tax-free withdraws in the future so long as used for college. The only downside is you lose the Iowa Tax Deduction if not using the official Iowa plan (though if you think about your effective state tax rate, that's probably a pretty small amount, unless you're quite wealthy).

Unfortunately I don't know of one that operates as a brokerage account where you can pick any stock, bond, mutual fund, etc. you want.