What's the best way for a childs money to grow with paying minimal taxes..?

Alternates to college funds..

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  • John T
    Lv 6
    1 decade ago
    Favorite Answer

    Dividend paying stocks is a great way. Dividends are taxed at a lower rate (in this case probably about 5% total with no FICA) if any tax at all.

    I'll give you two sectors and 3 stocks to consider. DO YOUR OWN RESEARCH. Don't just buy into them because someone told you they were good:

    McDonalds (MCD): has consistently grown, consistently paid dividends (and increased them) for a long time. It pays once a year. It is in what I term the kids market and many in that arena seem to do very well.

    Utilities Sector and the company I'd look at is Southern Company (SO): They are the top rated utility in the country in terms of customer satisfaction, growth, etc. They are good corporate citizens. They pay a dividend of approximately 4.5% and the share value is stable but growing.

    Annally Mortgage (NLY): Currently paying 6.7% dividends and increasing regularly. They buy AAA rated mortgages and their price is down for two reasons: housing market fears and interest rate hike fears. You do lose some of the tax advantage with this one as it is a REIT, but this shouldn't be much of a worry for a child's income. It will still be taxed at most as his 'earned' income or that of interest at the bank.

  • 1 decade ago

    Ok whatever you do, DON"T listen to the guy telling you to buy dividend paying stocks. The last thing you want to do when trying to accumulate funds for a child under the age of 18 for college is choose investment vehicles that generate income! There is a little thing called the kiddie tax that creates problems associated with saving via income producing instruments. Consider a 529 plan. It allows a substantial amount of money to be saved for college on a tax-free basis. Withdrawals from the 529 plan are generally income tax free, as long as they are used to pay for a child's college expenses.

    Source(s): CFP
  • 1 decade ago

    You have to consider the following:

    Length of time you want to invest

    Taxable investment or tax free

    Level of Risk

    If you can answer this, you will get better responses.

  • Anonymous
    1 decade ago

    I-Bonds are good. Interest is not taxed, if used for school (even books, room/board, computer for school, etc. will not be taxed if I-bond money is used).

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  • 1 decade ago

    minor saving account ! no tax at year end(double check with bank)

  • 1 decade ago

    money market

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