Investment vehicle or company for college student?
January 11, 2019 1:23 PM   Subscribe

My college freshman son has between 1 & 2 grand saved aside that he’d like to invest or put away somewhere to earn a bit - to start a long term investing plan. This seems like small potatoes and I believe that my own broker would charge him too much for his small investment. What’s a good vehicle or company or ??? to put this money in, that he can manage himself if he gets more interested? (That could grow with him?) My impression is that CDs are lame - but do banks offer other smarter options?
posted by chr1sb0y to Work & Money (8 answers total) 4 users marked this as a favorite
This is for the long term, like, retirement? He can open a Vanguard target retirement date [his year within a 5-year range] fund for only $1000. If he accepts e-statements and such, there is no account fee. The management fee will be as low as possible. This is what he should be doing whenever he starts earning money anyway.

He doesn't get the pleasure of "moving it around," but that is an expensive pleasure mostly indulged in by silly people who don't realize how much they're paying for it.
posted by praemunire at 1:26 PM on January 11 [5 favorites]

Robinhood is well-reviewed and has no fees. He can simply invest in an ETF or two for a long-term investment and/or play around with some trading if that interests him.
posted by Mr.Know-it-some at 1:34 PM on January 11

He should get himself to r/personalfinance and he's 20, he should invest in a stock-heavy Vanguard fund.
posted by DarlingBri at 1:38 PM on January 11 [4 favorites]

Your broker would also likely extend an account to him on the basis of his relationship with you, if that's what you want. My parents' broker did this in a similar situation.
posted by emkelley at 2:06 PM on January 11 [1 favorite]

Does he have earned income? Is he willing to keep aside this money till retirement? If yes to both, a Roth IRA might be the best way to go, even compared to a traditional IRA since his current tax rate must be really low.

Roth IRA or not, Vanguard lets you invest in their target retirement funds with as little as $1k and nearly the cheapest expense ratio on the market.
posted by redlines at 4:30 PM on January 11 [2 favorites]

He should open a Roth IRA while his income isn't high enough to disqualify him. You can still shift the funds around in your Roth IRA even though you're no longer able to contribute!

This is useful for diversifying into things (later on) that make you pay taxes on dividends, because in a Roth IRA, you don't pay tax on gains.
posted by batter_my_heart at 4:51 PM on January 11

Do not have your 20 year old son start any kind of retirement account with this money. That is five year money that he will need for apartment securities or medical emergencies within the next 5 years. Do not start a retirement account before you build your 6 month life savings account. Also definitely wait until the shutdown eventually causes a market crash and then invest if he does decide to invest.
posted by sockymcpuppeterson at 5:51 PM on January 11 [7 favorites]

The advantage of the Roth IRA for young adults is that the principal may be withdrawn for young adult expenses, such as apartments or car repairs, with no penalty (earnings are a different story).

Starting out you can think of it as an emergency fund that earns better than a bank account (assuming Trump doesn’t crater the market).

Otherwise, some online banks are paying 2% or slightly more for plain savings accounts.
posted by notyou at 12:04 AM on January 12

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