Investor Questions Podcast

How to buy index funds for your kids?

You will have to spend a lot of effort and time in order to understand index funds properly. If you are a small investor and you have heard of index funds, would it be the smartest move to put your money into something you don’t fully understand? Well, I think you don’t want to risk your money and that is why you need to take your time and do a well-done research about index funds before deciding to invest in them.

When you decide to invest money to save your kids’ future, you will find a lot of options; savings, certificates of deposits and index funds. Index funds are better than savings and certificates of deposits but they are more dangerous. Follow the following steps to make sure that everything will be OK and in order to avoid the high risks of index funds.

• Why are you investing in index funds?
Many parents invest to save money for colleges, medical emergencies and many other causes. Determine the cause as it will help you in the following steps.

When will your kid need the money?
If your kid will need the money after 10 years to go to college, the investment is different from needing it after 2 years.
There are companies that offer you to determine the year when your kids will need the money. It is better if you want things to be the specific.

• Your kid can’t open an account until he/she is 18 years old so you will have to set up the account for them. Also you need to determine the amount of money that will be invested in the index fund. Determine the capital of the index fund and you can add more money to it later.

• How to choose the best company and the best broker?
Experience is needed here. Go to a company that has a reputation of excellent investment plans. Deal with a broker that will give you the best benefits. Check companies’ websites and read the previous clients’ reviews about them. Ask for recommendations from friends and family members especially those who have secured their kids’ future through index funds too.

Take care of the expenses:
Choose the plan that will provide you with the best benefits and the least amount of expenses. This account may stay for a long time and you don’t want to pay a large fee all this time.

• The highly-diversified index fund is the best:
Securing your kids’ future needs more than one plan. That what the highly-diversified index fund provides. They put money in different kinds of security that is why the majority of it is safe as if a security falls, the rest will remain.
Also it does not require to be constantly checked. You just need to agree with your broker on all the details and then your money and your kids’ index funds are Okay.

When your kids are big enough to understand, tell them everything about their index funds. Introduce to them more information to realize that their future is safe and to be prepared to be in charge.

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