Choice of Two Investments
June 11, 2015 7:42 AM Subscribe
Loving, well-meaning relatives would like to build a nest egg for our infant son, and have given us the choice of two options: a whole life insurance policy or investment in a gold account (the commodity).
Which would you choose if you were given two options for a long-term gift investment for your infant child: a whole life insurance policy or an investment in a gold account? The whole life insurance has a policy face value of $100,000 and would mature in 18 years. I think the premiums are around $50/month. I assume that investments in the gold account would be less than the $50/month (knowing that the commission on the insurance is significant), but let's assume it's an investment intended to reap the same benefits (except the "permanent insurance" bit).
I admit to being heavily skeptical of the nature of both these investments, but I don't know which one is the better of the two when offered the choice.
If the answer hinges on specifics in the insurance policy or in the type/policies of a specific gold account, I would appreciate any hints as to things to ask about to make the decision.
Let's all take it as a given that we love these relatives, they love us and our son, they want to provide for him, and that they have reasons for offering these two options.
Let's all take it as a given that we, the parents of the child, will not have any luck trying to convince these relatives that other options would be better long-term investments, so we are not going to put ourselves in the position of driving a wedge or looking ungrateful when their intent is a long-term gift to our child.
We are very appreciative of this gift, we have no expectations of gifts, we are appreciative of their love for us and our son, and we just wish to be happy and loving and grateful all around.
Which would you choose if you were given two options for a long-term gift investment for your infant child: a whole life insurance policy or an investment in a gold account? The whole life insurance has a policy face value of $100,000 and would mature in 18 years. I think the premiums are around $50/month. I assume that investments in the gold account would be less than the $50/month (knowing that the commission on the insurance is significant), but let's assume it's an investment intended to reap the same benefits (except the "permanent insurance" bit).
I admit to being heavily skeptical of the nature of both these investments, but I don't know which one is the better of the two when offered the choice.
If the answer hinges on specifics in the insurance policy or in the type/policies of a specific gold account, I would appreciate any hints as to things to ask about to make the decision.
Let's all take it as a given that we love these relatives, they love us and our son, they want to provide for him, and that they have reasons for offering these two options.
Let's all take it as a given that we, the parents of the child, will not have any luck trying to convince these relatives that other options would be better long-term investments, so we are not going to put ourselves in the position of driving a wedge or looking ungrateful when their intent is a long-term gift to our child.
We are very appreciative of this gift, we have no expectations of gifts, we are appreciative of their love for us and our son, and we just wish to be happy and loving and grateful all around.
I would say the question is what sort of interest rate will be yielded on either account.
I do have a permanent life insurance policy for one of my children, so I'm familiar with that to some degree. If I believe I can get better interest in another type of investment then the only benefit of the life insurance policy over that other type of investment should be that if the child dies, there's a life insurance policy that could pay out.
Assumptions are often that the market could yield 6-7% interest by investing in tried-and-true types of investments such as index funds, some optimistic estimates might say you could do even better than that but I don't think that's a safe assumption.
Comparing investments is a matter of how much you are putting in, what interest yield you expect to earn, and what fees are being charged on the investment - those are the specifics you'd need to compare the two.
posted by treehorn+bunny at 7:54 AM on June 11, 2015
I do have a permanent life insurance policy for one of my children, so I'm familiar with that to some degree. If I believe I can get better interest in another type of investment then the only benefit of the life insurance policy over that other type of investment should be that if the child dies, there's a life insurance policy that could pay out.
Assumptions are often that the market could yield 6-7% interest by investing in tried-and-true types of investments such as index funds, some optimistic estimates might say you could do even better than that but I don't think that's a safe assumption.
Comparing investments is a matter of how much you are putting in, what interest yield you expect to earn, and what fees are being charged on the investment - those are the specifics you'd need to compare the two.
posted by treehorn+bunny at 7:54 AM on June 11, 2015
My husband had a whole life policy similarly provided for him as a child, though it wasn't kept up for the whole time (i.e. actual value a couple thousand, much less than your planned value). To the best of my knowledge he's done nothing with it - he has no idea what it really is, what the rules are, what to do with it, how to get the money, etc. (caveat, he hates paperwork and forms and hoops to jump through, even more than the average person.)
Just for that, I'd recommend the gold, because it's simpler to cash out when it's time.
posted by aimedwander at 7:58 AM on June 11, 2015
Just for that, I'd recommend the gold, because it's simpler to cash out when it's time.
posted by aimedwander at 7:58 AM on June 11, 2015
The aim of this investment is to provide the most benefit to the child in the most efficient way. Unfortunately neither of those two options will do that. So you need to research the most tax efficient way to structure each of those two options, since that is likely where you will get the most gains. Do not forget to factor in risk/volatiliy.
posted by gorcha at 7:58 AM on June 11, 2015 [2 favorites]
posted by gorcha at 7:58 AM on June 11, 2015 [2 favorites]
This is an incredibly difficult choice. One thought I had was, what if circumstances change for these kind relatives and they are not able to keeping paying into whichever investment is chosen? I tried to look into what happens if you stop paying into whole life insurance, because I was thinking that could be a big factor in your decision-making. However, I am not sure of the consequences, for example is there still money available to remove? I think it's important to get an answer to that question, because then I would chose the gold investment. Words I never thought would come from my fingertips. Good luck.
On preview, I agree with MoonOrb, the ability to make changes is where I am coming from as well.
posted by dawg-proud at 8:09 AM on June 11, 2015 [3 favorites]
On preview, I agree with MoonOrb, the ability to make changes is where I am coming from as well.
posted by dawg-proud at 8:09 AM on June 11, 2015 [3 favorites]
Seconding MoonOrb. Assuming that a large chunk of this money would be paying for college tuition, you don't want it in something as volatile as gold. No one can even guess what the price of gold will be in 2033. It could be 3x what it is now, or 1/3. The stock market is safe in comparison. Choose the insurance policy.
posted by Asparagus at 8:09 AM on June 11, 2015 [2 favorites]
posted by Asparagus at 8:09 AM on June 11, 2015 [2 favorites]
On the one hand, gold has always seemed to me to amount to a bet about what crazy people are going to do, and the thing about crazy people is that they're not very predictable. A boring expectation of a mildly-negative-to-mildly-positive net return from a whole life policy seems preferable.
On the other hand, your question indicates you're well aware that neither are very good investments. In that case, you might view them more as (expensive) gestures from your relatives than as real investments. If you feel like that, then maybe make a show of asking the relatives what they think is best and doing what they prefer.
posted by ROU_Xenophobe at 8:10 AM on June 11, 2015 [2 favorites]
On the other hand, your question indicates you're well aware that neither are very good investments. In that case, you might view them more as (expensive) gestures from your relatives than as real investments. If you feel like that, then maybe make a show of asking the relatives what they think is best and doing what they prefer.
posted by ROU_Xenophobe at 8:10 AM on June 11, 2015 [2 favorites]
Whole Life is not an investment, it's a long term financial contract to pay the insurance salesman. Whole life contracts are very opaque and difficult to get out of.
I'm not sure what you mean by "gold account" (bullion? coins? gold mining? savings account backed by gold?), but with the gold, at least you can easily sell it later and reinvest in something else.
posted by LoveHam at 8:21 AM on June 11, 2015 [1 favorite]
I'm not sure what you mean by "gold account" (bullion? coins? gold mining? savings account backed by gold?), but with the gold, at least you can easily sell it later and reinvest in something else.
posted by LoveHam at 8:21 AM on June 11, 2015 [1 favorite]
IAAA, BIANYA (I am an actuary, but I am not your actuary)
We're gonna need a little more information about that life insurance policy. You say "whole life insurance that matures in 18 years for face amount 100k$", but that sounds more like an endowment than a whole life policy (whole life policies are for your whole life, hence the name). What are the exact details? Who is the beneficiary, you or your son? Do you get 100k$ only if you're alive (or your son) in 18 years? Or do you get 100k$ at the earliest of your death or 18 years? Is anything paid on death? Are there any benefits in the case of disability or serious illness? These are all very important and matter, and you need to decide what sort of benefit you're truly looking for.
I would like to assume that your policy is an 18 year endowment insurance, i.e. your son gets 100k$ at the earliest of your death or 18 years from today, but the premium is much much too low for that. Is it a term life insurance, i.e. if you die within the next 18 years you get 100k$, nothing if you die after? Like I said, very important to understand.
Anyway, speaking in generalities, when you're purchasing life insurance, what you're really doing is you're getting rid of several risks. What risks? Well, the big one is death. If you die early, you forfeit any future income you may get from working, so life insurance insures against your estate from becoming destitute.
Another risk you're handing off to the insurer is interest rate risk. This is the biggest difference between an asset investment and a life insurance contract. Simply stated, with the insurance you're getting 100k$ at some point full-stop regardless of how the market does in the interim. With the gold, you're buying 50$ worth of gold every month, but the market may crash just before jr. starts college and you'll loose a big chunk. Inversely, the gold market may just as well boom, and you'll triple your money. With the policy, you trade the chance of huge gains for the assurance that you won't suffer huge losses. Are you comfortable with this?
Another thing to consider is what the purpose of this money is. Is the goal to send jr. to college debt free? Then an endowment insurance is the good call. Is the goal to make jr. live a comfortable life where he can work exactly as much as he wants? Well then you might prefer a deferred life/term annuity for something like 10k$ a year because 18 year olds are notoriously crap at managing mind boggling amounts of money they suddenly acquire. Is the goal to make sure that jr. is taken care of in the unfortunate event of your death? Then a term life policy is perfect (and it's cheap, too!). Is the goal to give jr. a bunch of assets he can play around with and try to game the market? Then gold it is!
Come to think of it, I would actually recommend against the gold investment for almost everyone. I don't know how this particular investment is structured, but there definitely isn't a fort knox somewhere where your own personal gold is being stored. So necessarily the person selling you this investment will be charging management fees, cutting in to any potential profits and making losses hurt that much more. Also, and this is very important, you know absolutely nothing about the gold market. How can you be an intelligent consumer if you don't know anything about what you're buying?
So, basically, I have no advice for the moment because we need a bunch more information! Long term planning is always complex; doubly so because humans are terrible at evaluating risks rationally.
Anyway, best of luck! Wish my parents had this sort of foresight!
posted by Mons Veneris at 8:25 AM on June 11, 2015 [4 favorites]
We're gonna need a little more information about that life insurance policy. You say "whole life insurance that matures in 18 years for face amount 100k$", but that sounds more like an endowment than a whole life policy (whole life policies are for your whole life, hence the name). What are the exact details? Who is the beneficiary, you or your son? Do you get 100k$ only if you're alive (or your son) in 18 years? Or do you get 100k$ at the earliest of your death or 18 years? Is anything paid on death? Are there any benefits in the case of disability or serious illness? These are all very important and matter, and you need to decide what sort of benefit you're truly looking for.
I would like to assume that your policy is an 18 year endowment insurance, i.e. your son gets 100k$ at the earliest of your death or 18 years from today, but the premium is much much too low for that. Is it a term life insurance, i.e. if you die within the next 18 years you get 100k$, nothing if you die after? Like I said, very important to understand.
Anyway, speaking in generalities, when you're purchasing life insurance, what you're really doing is you're getting rid of several risks. What risks? Well, the big one is death. If you die early, you forfeit any future income you may get from working, so life insurance insures against your estate from becoming destitute.
Another risk you're handing off to the insurer is interest rate risk. This is the biggest difference between an asset investment and a life insurance contract. Simply stated, with the insurance you're getting 100k$ at some point full-stop regardless of how the market does in the interim. With the gold, you're buying 50$ worth of gold every month, but the market may crash just before jr. starts college and you'll loose a big chunk. Inversely, the gold market may just as well boom, and you'll triple your money. With the policy, you trade the chance of huge gains for the assurance that you won't suffer huge losses. Are you comfortable with this?
Another thing to consider is what the purpose of this money is. Is the goal to send jr. to college debt free? Then an endowment insurance is the good call. Is the goal to make jr. live a comfortable life where he can work exactly as much as he wants? Well then you might prefer a deferred life/term annuity for something like 10k$ a year because 18 year olds are notoriously crap at managing mind boggling amounts of money they suddenly acquire. Is the goal to make sure that jr. is taken care of in the unfortunate event of your death? Then a term life policy is perfect (and it's cheap, too!). Is the goal to give jr. a bunch of assets he can play around with and try to game the market? Then gold it is!
Come to think of it, I would actually recommend against the gold investment for almost everyone. I don't know how this particular investment is structured, but there definitely isn't a fort knox somewhere where your own personal gold is being stored. So necessarily the person selling you this investment will be charging management fees, cutting in to any potential profits and making losses hurt that much more. Also, and this is very important, you know absolutely nothing about the gold market. How can you be an intelligent consumer if you don't know anything about what you're buying?
So, basically, I have no advice for the moment because we need a bunch more information! Long term planning is always complex; doubly so because humans are terrible at evaluating risks rationally.
Anyway, best of luck! Wish my parents had this sort of foresight!
posted by Mons Veneris at 8:25 AM on June 11, 2015 [4 favorites]
How old are these relatives? In whose name will the investment be held (in your son's name, in a trust, in their name w/ him as the beneficiary)? If it will be held in the relative's name, what happens if they die? How does the asset transfer to your child (if at all) at that point? If in the child's name, are there special gifts-to-minors or tax liability things you need to think about? Will the asset be considered part of the child's assets when applying for college?
posted by melissasaurus at 8:27 AM on June 11, 2015 [1 favorite]
posted by melissasaurus at 8:27 AM on June 11, 2015 [1 favorite]
Gold is liquid but volatile.
Whole Life is the opposite.
Which do you value more?
posted by blue_beetle at 8:34 AM on June 11, 2015 [3 favorites]
Whole Life is the opposite.
Which do you value more?
posted by blue_beetle at 8:34 AM on June 11, 2015 [3 favorites]
I'm assuming that the life insurance policy would be on the child, not on either of you or on the relatives. Assuming that's correct, does the life insurance policy include some sort of allowance for the policy holder to increase their coverage at a later date? If so, that may be worth considering. If your child should be diagnosed with some medical condition in the future that could make getting new term coverage difficult, it might be possible for them to increase their life insurance coverage under the terms of this policy.
Also, I'd note that gold is still relatively high right now, and does not generate any sort of dividends (except negative dividends in the form of paying to keep it safe).
posted by pie ninja at 8:35 AM on June 11, 2015
Also, I'd note that gold is still relatively high right now, and does not generate any sort of dividends (except negative dividends in the form of paying to keep it safe).
posted by pie ninja at 8:35 AM on June 11, 2015
Response by poster: The child would be the insured, with my husband the owner of the policy (until he is of age) and the relatives would pay the premiums. $100k would be paid out in the event of my son's death (which is what I thought "policy face value" meant). I don't think the policy cash value would be $100k (or anywhere near it) when my son is 18, but it would "mature" by that time, whatever that means.
I have no idea what kind of gold account it would be, but if there are better or worse ways to invest in gold, please share.
posted by aabbbiee at 9:47 AM on June 11, 2015
I have no idea what kind of gold account it would be, but if there are better or worse ways to invest in gold, please share.
posted by aabbbiee at 9:47 AM on June 11, 2015
Response by poster: One of these relatives had health issues earlier in life than he expected, and obtaining life insurance has been an issue for him since that time. I think the "permanent life insurance" bit is therefore a big deal for him.
posted by aabbbiee at 9:50 AM on June 11, 2015
posted by aabbbiee at 9:50 AM on June 11, 2015
As pointed out, both of these investments are pretty bad. But the bottom line is don't sweat it. Neither of these is going to be life changing for your child. Eighteen years from now they won't even cover one semester of college.
Gold is not really an investment. Over a long periods of time its expected real return is zero. That is, it will just cover inflation. Unfortunately, its price is very volatile so when you need to cash it in, you have no idea how much you can get for it.
On the other hand, the whole life insurance has a pretty well defined value. You get the insurance coverage, which has some value, and you also have a cash value if you decide to cash it in at age 18.
Both of these -- I hesitate to call them investments -- will have a value somewhere around $10,000 to $15,000. While I hate to recommend whole life, it does have the advantage of well defined value so I would go for that.
But again, neither of these amounts to a lot of money so flip a coin and then enjoy the fact that your relatives care enough to give a gift to your child. As they say, it's the thought that counts.
posted by JackFlash at 10:38 AM on June 11, 2015 [1 favorite]
Gold is not really an investment. Over a long periods of time its expected real return is zero. That is, it will just cover inflation. Unfortunately, its price is very volatile so when you need to cash it in, you have no idea how much you can get for it.
On the other hand, the whole life insurance has a pretty well defined value. You get the insurance coverage, which has some value, and you also have a cash value if you decide to cash it in at age 18.
Both of these -- I hesitate to call them investments -- will have a value somewhere around $10,000 to $15,000. While I hate to recommend whole life, it does have the advantage of well defined value so I would go for that.
But again, neither of these amounts to a lot of money so flip a coin and then enjoy the fact that your relatives care enough to give a gift to your child. As they say, it's the thought that counts.
posted by JackFlash at 10:38 AM on June 11, 2015 [1 favorite]
but if there are better or worse ways to invest in gold, please share.
from your post, investment in a gold account sounds to me like something like a gold exchange-traded fund, and not bullion, coins or certificates.
Gold is a non-standard investment on its own. As part of a stock and bond portfolio, to act as a hedge, or track as part of a commodity portfolio, it's less non-standard. Especially if its part of a "precious metals" groups (gold, silver, platinum, palladium etc.)
However, a whole life insurance policy is NOT a "nest egg" (unless it's payable on your death, to your son).
I suggest you gather as much information as you can about the two options, and talk to a fee-only financial advisor.
posted by the man of twists and turns at 10:48 AM on June 11, 2015
from your post, investment in a gold account sounds to me like something like a gold exchange-traded fund, and not bullion, coins or certificates.
Gold is a non-standard investment on its own. As part of a stock and bond portfolio, to act as a hedge, or track as part of a commodity portfolio, it's less non-standard. Especially if its part of a "precious metals" groups (gold, silver, platinum, palladium etc.)
However, a whole life insurance policy is NOT a "nest egg" (unless it's payable on your death, to your son).
I suggest you gather as much information as you can about the two options, and talk to a fee-only financial advisor.
posted by the man of twists and turns at 10:48 AM on June 11, 2015
I don't think the policy cash value would be $100k (or anywhere near it) when my son is 18, but it would "mature" by that time, whatever that means.
Mons Veneris' post and your response are correct I'd say. The WL policy would return around 8--15k after 18 years. (WL normally has a minimum annual growth of ~3% but there are fees which are deducted.)
I think the "permanent life insurance" bit is therefore a big deal for him.
While I can understand his concern -- this is indeed a huge selling angle for salesmen, if you have a WL policy and get sick you're guaranteed insurance blah blah -- getting insurance now won't really help because your son won't need any life insurance until he has responsibilities. And therefore you will 99.9% likely not get a follow up policy when he's 18. So there is no win there -- you no doubt know that already.
I would go with gold because if anything should happen -- e.g. they let the WL policy lapse -- there will be nothing or very little left as the policies fees will eat itself up -- it won't be worth what was paid in for 10 years. So gold is far more reliable in that sense, even though it's volatile.
Last, I know you said you're not prepared to negotiate, but could you (maybe, maybe) consider suggesting a 529 college savings plan to them. They can open it in their name if they wish, with your child as the named recipient. Perhaps if you couched it as, 'We just had a thought! At 18 we all hope junior will be starting college. How about starting a dedicated college fund. This way there's no tax bill for junior when it matures -- he can take the whole amount.'
posted by NailsTheCat at 1:13 PM on June 11, 2015
Mons Veneris' post and your response are correct I'd say. The WL policy would return around 8--15k after 18 years. (WL normally has a minimum annual growth of ~3% but there are fees which are deducted.)
I think the "permanent life insurance" bit is therefore a big deal for him.
While I can understand his concern -- this is indeed a huge selling angle for salesmen, if you have a WL policy and get sick you're guaranteed insurance blah blah -- getting insurance now won't really help because your son won't need any life insurance until he has responsibilities. And therefore you will 99.9% likely not get a follow up policy when he's 18. So there is no win there -- you no doubt know that already.
I would go with gold because if anything should happen -- e.g. they let the WL policy lapse -- there will be nothing or very little left as the policies fees will eat itself up -- it won't be worth what was paid in for 10 years. So gold is far more reliable in that sense, even though it's volatile.
Last, I know you said you're not prepared to negotiate, but could you (maybe, maybe) consider suggesting a 529 college savings plan to them. They can open it in their name if they wish, with your child as the named recipient. Perhaps if you couched it as, 'We just had a thought! At 18 we all hope junior will be starting college. How about starting a dedicated college fund. This way there's no tax bill for junior when it matures -- he can take the whole amount.'
posted by NailsTheCat at 1:13 PM on June 11, 2015
Response by poster: I appreciate all comments, but negotiating the terms of this gift is not possible. We want to pick the best of the two choices selected by those who are giving our son this gift. We will not dictate the terms under which it is given. Please reread the question and the mod's note in the first comment.
[FWIW, our (very lucky, very privileged) son does have a more traditional college savings started by other loving relatives. We did not dictate the terms of that account either.]
posted by aabbbiee at 1:24 PM on June 11, 2015
[FWIW, our (very lucky, very privileged) son does have a more traditional college savings started by other loving relatives. We did not dictate the terms of that account either.]
posted by aabbbiee at 1:24 PM on June 11, 2015
The child would be the insured, with my husband the owner of the policy (until he is of age) and the relatives would pay the premiums. $100k would be paid out in the event of my son's death (which is what I thought "policy face value" meant). I don't think the policy cash value would be $100k (or anywhere near it) when my son is 18, but it would "mature" by that time, whatever that means.
OK, so, going on these sparse details, I believe what you're being sold is called "universal life insurance" which is very very very different from "permanent life insurance".
Permanent life insurance is: you pay premiums until you die, and when you die the insurer pays you a benefit. Period. This is not what your policy is.
Universal life is different (it's sometimes called participating life insurance). A very simple way to understand these types of policies is that you have a savings account with the insurer. You make regular deposits into the account (these are the premiums), and the deposits earn interest at a rate that varies according to the rules outlined in the policy. Additionally, the insurer deducts a certain amount from the account every month in charges (specified in the policy).
There are two major types of universal life: Type A or Type B. If the policyholder dies before the policy lapses, a benefit is paid. In a Type A policy, you get the face amount only and the savings account is wiped to 0$. In a type B policy, you get the face amount plus the contents of your savings account. Type A policies are always cheaper.
If the policyholder does not die when the policy matures, then the entirety of the savings account are paid. If the policyholder wishes to withdraw before maturity, the contents of the savings account are paid minus an early withdrawal charge.
The advantages of Universal Life policies are:
This might be more interesting if the benefits were conditional on the death of either parent, in which case you would be looking out for the child in the event that something should happen (knock on wood).
But anyway, given that you have a choice between a certainly shitty UL policy and a maybe shitty gold investment, I'd go with the gold.
At least you'll be able to make a pretty ring with it if someone finds the philosopher's stone.
posted by Mons Veneris at 1:26 PM on June 11, 2015 [1 favorite]
OK, so, going on these sparse details, I believe what you're being sold is called "universal life insurance" which is very very very different from "permanent life insurance".
Permanent life insurance is: you pay premiums until you die, and when you die the insurer pays you a benefit. Period. This is not what your policy is.
Universal life is different (it's sometimes called participating life insurance). A very simple way to understand these types of policies is that you have a savings account with the insurer. You make regular deposits into the account (these are the premiums), and the deposits earn interest at a rate that varies according to the rules outlined in the policy. Additionally, the insurer deducts a certain amount from the account every month in charges (specified in the policy).
There are two major types of universal life: Type A or Type B. If the policyholder dies before the policy lapses, a benefit is paid. In a Type A policy, you get the face amount only and the savings account is wiped to 0$. In a type B policy, you get the face amount plus the contents of your savings account. Type A policies are always cheaper.
If the policyholder does not die when the policy matures, then the entirety of the savings account are paid. If the policyholder wishes to withdraw before maturity, the contents of the savings account are paid minus an early withdrawal charge.
The advantages of Universal Life policies are:
- You may vary the premiums easily. As long as the money in the savings account is above 0$, you're still getting insurance protection, so you may pay less into the account when times are tough.
- Certain policies have "no-lapse guarantees" which keeps the policy in force even if the amount in the savings account is 0$. Check the policy.
- Withdrawal is a lot simpler to understand than with typical policies, and you know at every moment exactly how much money you have in your savings account.
- You get a nice fuzzy feeling of participating, which is totally illusory because the insurer will always be extracting their pound of flesh in some way (not that this is 100% bad for you!)
This might be more interesting if the benefits were conditional on the death of either parent, in which case you would be looking out for the child in the event that something should happen (knock on wood).
But anyway, given that you have a choice between a certainly shitty UL policy and a maybe shitty gold investment, I'd go with the gold.
At least you'll be able to make a pretty ring with it if someone finds the philosopher's stone.
posted by Mons Veneris at 1:26 PM on June 11, 2015 [1 favorite]
I think they both suck about equally, and I'd tell the relatives, "Thank you for your gift! I'm sure that whatever vehicle you choose is the right one for Junior," and leave it at that. I don't want to have to argue for one or the other, I don't want to discuss the relative merits of each, and I sure as hell don't want to make a decision that (a) I don't fully grok and (b) think is worthless anyways. And then when relatives call to give you the exciting news about the latest returns, all you have to say is, "Wow, that's a great investment! Thank you so much," and that saves you so much time, which you can then invest with your child. If you get accused of not caring about the investment, you can truthfully say, "But I do care, and you are far more knowledgeable than I, therefore you're the better judge."
posted by disconnect at 1:47 PM on June 11, 2015 [1 favorite]
posted by disconnect at 1:47 PM on June 11, 2015 [1 favorite]
One thought I had was that if you look at this as just part of your joint family asset portfolio, the gold might give you a little bit of diversification. According to this, (not necessarily reputable site), gold has a near zero correlation with the stock market which means that if the stock market goes down, gold could be going up or staying stable or dipping down. So, if his other investments are hard hit when it is time for college, there is a chance the gold might be doing OK. And if the gold performed poorly, then the rest of the family assets will be there to help pay for school.
posted by metahawk at 3:37 PM on June 11, 2015
posted by metahawk at 3:37 PM on June 11, 2015
Will your child be the owner? If so, different assets might have different ramifications on student aid and student loans. I have heard, but don't know about, some types of insurance that aren't considered assets for the purposes of the FAFSA.
If the gold will be in your child's name, I don't see how that WOULDN'T be considered for the FAFSA.
posted by small_ruminant at 4:54 PM on June 12, 2015
If the gold will be in your child's name, I don't see how that WOULDN'T be considered for the FAFSA.
posted by small_ruminant at 4:54 PM on June 12, 2015
This thread is closed to new comments.
posted by LobsterMitten (staff) at 7:49 AM on June 11, 2015