I hate how many toys I have in my house. It isn’t the clutter as I am not a neat guy, it is that I truly believe that my son just doesn’t care about 92% of the toys. So I think I just see them as wasted money mostly by very generous friends and family. If I threw out most of them he just wouldn’t notice. I was expressing my feelings to a buddy when he told me about a great idea I have now completely stolen. While it probably isn’t original it is something I had never thought of. Instead of purchasing a gift that his niece or nephew won’t remember he takes the equivalent amount he would have spent and invests it for them.
He told me this idea within a few days of getting my Niece’s first birthday invitation. I passed the idea by The Wife first to make sure i wasn’t doing some weird personal finance nerd thing, but she backed me up. We told/asked my brother and his wife and they seemed interested in the idea since unlike me they are an anti-clutter family.
How I am Investing for my Niece
Despite the money being a “gift” I have decided to keep the money in my name but providing my brother and his wife a duplicate copy of the statement. I decided on this structure rather than an UTMA, uniform transfer to minors account, as I dislike the fact that those accounts are supposed to automatically transfer at twenty-one. Who knows what she’ll be like at 21? or how much will be in the account? The other option was to give my brother the money and let him handle it, but I decided against that because I
think know I want that moment when I eventually tell her how much her Uncle Evan has for her.
Since I knew the type of account (non-qualified brokerage in my name) the next question was what type of investments should we put her in? I had a similar question when I started investing my son’s money. So building off that post and what I did for him:
- I wanted some tax efficiency as I don’t want to be paying the taxes on earning for the next 18, 21, 30 years!
- It isn’t my money anymore some while some risk is needed for growth it can’t be 100% equities.
- Since it isn’t my money anymore it is my responsibility to find low cost investment options.
With those goals in mind I think I am going with an eventual goal of 90% New York State Bond ETFs and 10% Low Cost Index Fund ETF. Why is it an eventual goal? I am not investing a lump sum but rather small amounts over the course of the year, so I can only really buy one equity per holiday. Also the reason why I chose ETFs over mutual funds.
The 90% Bond portion will be split over the next few gift giving holidays to take on some short term, mid term and long term bond etfs. Once I have those orders fulfilled I will purchase a low cost index fund.
Do you do this for family? Am I a terrible uncle because I don’t want to buy another toy she won’t give a shit about?