I made my first investment when I was born.

O.K., Grandma Werner did. She bought me a savings bond of some sort. I can’t remember the duration or the letter. But I do remember feeling crazy rich when in my early twenties I cashed it and others out to do who knows what. I don’t even remember the amount that made me feel so flush, although some would have continued to appreciate if I’d only had some discipline.

During my teenage years, the Roth IRA didn’t exist. And if it had, I’m sure I wouldn’t have known about it, unless my parents told me about it.

When my daughter was a few months old, she had a modeling gig and made $185– not enough to open a Roth.

But imagine money compounding for 65 years or longer! That’s why the introduction of a 401(k) kids account in Congress is so cool.

Here’s a small item from Investment News:

The 401Kids Family Savings Act of 2007, introduced by Rep. Judy Biggert, R-Ill., would allow a yearly $2,000 after-tax contribution to the accounts but would allow interest to accumulate tax free. Qualified withdrawals also would be tax free.

The qualified withdrawals would include buying a house and funding education.

Coverdell Accounts, also known as education IRAs, would be renamed Kids 401(k)s.

For more details, visit Thomas and search for HR 87.
I love the idea of tax advantaged saving for kids.
But I wish folks would do a better job naming these savings plans. To me, 401(k) means workplace and tax-deferred. This name will just confuse people.

Until something like this makes it through Congress (and I wonder how likely it really is to be signed into law), how do you save for junior’s future?

Both of my kids have online saving accounts for their gift money and each has a bond from Great Grandma Werner. But neither has a 529 college savings plan yet because I haven’t maxed out my 401(k).

When they’re older, I plan to take most of the money we currently spend on day care and use that to max my retirement fund. Whatever is left I will use to fund a 529 plan.

This entry was posted on Tuesday, April 3rd, 2007 at 10:59 am and is filed under Kara\'s finances, kids and money, saving. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.