Investing for the children's future

[runmanTX]

So I'm thinking to begin some type of savings / investment account for my children. Ideally, I would like to put the accounts in their respective names using their US Social Security numbers. They are 17 and 18 years of age. This would not be for university as I'm obviously way behind the ball on that. I would like to merely start a long term savings account which I could deposit / invest into for them. I've thought about custodial accounts with my broker but those accounts seem to terminate at between 18 to 25 years of age depending on the State. I want them to take advantage of "time in the market" which I didn't have the good fortune of having as I started investing later in life. Probably purchase ETFs like VTI to get them started.

What might be some good options?

Another factor is they have dual citizenship (Japanese and American) which may be important for tax reporting / PFIC issues many years down the line. They could end up as adults living in Japan, the US or the UK. They are currently leaning towards attending universities in the UK.
I am currently investing through my broker (TD Ameritrade) in the US.

Has anyone been through or began this stage of financial parenting?

[EmaxisSlim Cultist]

So I'm thinking to begin some type of savings / investment account for my children. Ideally, I would like to put the accounts in their respective names using their US Social Security numbers. They are 17 and 18 years of age. This would not be for university as I'm obviously way behind the ball on that. I would like to merely start a long term savings account which I could deposit / invest into for them. I've thought about custodial accounts with my broker but those accounts seem to terminate at between 18 to 25 years of age depending on the State. I want them to take advantage of "time in the market" which I didn't have the good fortune of having as I started investing later in life. Probably purchase ETFs like VTI to get them started.

What might be some good options?

Another factor is they have dual citizenship (Japanese and American) which may be important for tax reporting / PFIC issues many years down the line. They could end up as adults living in Japan, the US or the UK. They are currently leaning towards attending universities in the UK.
I am currently investing through my broker (TD Ameritrade) in the US.

Has anyone been through or began this stage of financial parenting?

Their options are limited as Americans. Basically only Japanese single stocks in Japan.

You best be is to talk to you Ameritrade rep, or look into Interactive Brokers.

As an aside, there is always Bonds through Treasurydirect.

[TokyoWart]

We used Junior NISA accounts for our kids but they all held individual stocks so we could avoid the PFIC tax complications for US citizens. If you can open US accounts, a custodial account for your kids gives you the greatest freedom in investment choices. Both the US custodial account and the J-NISA is fully under the control of your child when they reach the age of majority. When they are applying for financial aid at US universities those assets get counted higher (at 20%) than your assets (5.6%) or a 529 account (5.6%) in calculating financial aid eligibility.

[runmanTX]

So I'm thinking to begin some type of savings / investment account for my children. Ideally, I would like to put the accounts in their respective names using their US Social Security numbers. They are 17 and 18 years of age. This would not be for university as I'm obviously way behind the ball on that. I would like to merely start a long term savings account which I could deposit / invest into for them. I've thought about custodial accounts with my broker but those accounts seem to terminate at between 18 to 25 years of age depending on the State. I want them to take advantage of "time in the market" which I didn't have the good fortune of having as I started investing later in life. Probably purchase ETFs like VTI to get them started.

What might be some good options?

Another factor is they have dual citizenship (Japanese and American) which may be important for tax reporting / PFIC issues many years down the line. They could end up as adults living in Japan, the US or the UK. They are currently leaning towards attending universities in the UK.
I am currently investing through my broker (TD Ameritrade) in the US.

Has anyone been through or began this stage of financial parenting?

Their options are limited as Americans. Basically only Japanese single stocks in Japan.

You best be is to talk to you Ameritrade rep, or look into Interactive Brokers.

As an aside, there is always Bonds through Treasurydirect.

Yes, it seems Americans often get the short end of the stick. Will check the bond option with Treasurydirect. Had forgotten about that option.
As for Interactive Brokers, the expensive (monthly?) maintenance fee is what initially discouraged me from opening an account with them. Some sort of minimum balance fee if I recall. Is that still the case?

[runmanTX]

We used Junior NISA accounts for our kids but they all held individual stocks so we could avoid the PFIC tax complications for US citizens. If you can open US accounts, a custodial account for your kids gives you the greatest freedom in investment choices. Both the US custodial account and the J-NISA is fully under the control of your child when they reach the age of majority. When they are applying for financial aid at US universities those assets get counted higher (at 20%) than your assets (5.6%) or a 529 account (5.6%) in calculating financial aid eligibility.

Thanks for the reply. I had the idea that custodial accounts are only good until the kids become of legal age, correct? Since my kids are 17 and 18 I'm not sure if it would even be worth opening the accounts for such a short period. Hmmm.

Probably not going to apply for FA in the USA as my kids are going to UK for universities. So is the current plan, anyway.

Maybe I should scrap the individual account investment plan for them altogether. Just keep investing in my brokerage account stateside and gift them something in 10 years or so? What do you think?

[EmaxisSlim Cultist]

Yes, it seems Americans often get the short end of the stick. Will check the bond option with Treasurydirect. Had forgotten about that option.
As for Interactive Brokers, the expensive (monthly?) maintenance fee is what initially discouraged me from opening an account with them. Some sort of minimum balance fee if I recall. Is that still the case?

They seem to have relaxed that requirement in most countries this year, but not yet in Japan, it seems.

One has to weigh their options.

1. A custodial account through your current American brokerage is your best bet by far.

2. I and EE bonds through TreasuryDirect

3. Japanese Bluechips in a Junior-Nisa. (no etfs/funds, be careful of PFIC like Orix. No there is no list of PFICs, and they do not have to disclose their status. You need to check their holdings.).

4. IBKR -> Classic ETF plays -> VOO/VTI/VT/BND/BNDX/BNDW

(Caveat: I am not American, all my sons holdings are in A J-NIsa, ACWI fund.)

[TokyoWart]

Thanks for the reply. I had the idea that custodial accounts are only good until the kids become of legal age, correct? Since my kids are 17 and 18 I'm not sure if it would even be worth opening the accounts for such a short period. Hmmm.

Probably not going to apply for FA in the USA as my kids are going to UK for universities. So is the current plan, anyway.

Maybe I should scrap the individual account investment plan for them altogether. Just keep investing in my brokerage account stateside and gift them something in 10 years or so? What do you think?

I think custodial accounts are a bad idea if you are worried that the kids will misuse the money when they can control the account but otherwise I actually prefer them because I have US tax advantages for getting the investments off my tax return. If control is important then I think you would probably find it easier to just invest within your own account (and you have better investment options in the US account than here in Japan).

[runmanTX]

Thanks for the reply. I had the idea that custodial accounts are only good until the kids become of legal age, correct? Since my kids are 17 and 18 I'm not sure if it would even be worth opening the accounts for such a short period. Hmmm.

Probably not going to apply for FA in the USA as my kids are going to UK for universities. So is the current plan, anyway.

Maybe I should scrap the individual account investment plan for them altogether. Just keep investing in my brokerage account stateside and gift them something in 10 years or so? What do you think?

I think custodial accounts are a bad idea if you are worried that the kids will misuse the money when they can control the account but otherwise I actually prefer them because I have US tax advantages for getting the investments off my tax return. If control is important then I think you would probably find it easier to just invest within your own account (and you have better investment options in the US account than here in Japan).

I'm not really worried about control or misuse issues with my kids. I think the best option for me is to keep investing in my own US account for now. That way I can focus on fewer things. And if the kids do end up misbehaving, I can just cut them out of the will. Haha!

Thanks for the comments.

[runmanTX]

Yes, it seems Americans often get the short end of the stick. Will check the bond option with Treasurydirect. Had forgotten about that option.
As for Interactive Brokers, the expensive (monthly?) maintenance fee is what initially discouraged me from opening an account with them. Some sort of minimum balance fee if I recall. Is that still the case?

They seem to have relaxed that requirement in most countries this year, but not yet in Japan, it seems.

One has to weigh their options.

1. A custodial account through your current American brokerage is your best bet by far.

2. I and EE bonds through TreasuryDirect

3. Japanese Bluechips in a Junior-Nisa. (no etfs/funds, be careful of PFIC like Orix. No there is no list of PFICs, and they do not have to disclose their status. You need to check their holdings.).

4. IBKR -> Classic ETF plays -> VOO/VTI/VT/BND/BNDX/BNDW

(Caveat: I am not American, all my sons holdings are in A J-NIsa, ACWI fund.)

Cheers and thanks for the comments. Think I'll go with the less troublesome option of investing in my own account....for now, anyway.

[akiaji]

This is a topic I am thinking about as well. With me and the kids having US citizenship, options are not too great. Starting with things like the Junior NISA would be nice, but I'm not sure if the selection would be useful or safe from a PFIC perspective. Plus even though it is tax-free in Japan the US would take its share anyway.

For now, I am thinking maybe best to just put away a bit each year to bank accounts in their names, staying under the yearly gift tax limits. Then when they get older, they will have some cash to their names.

Or maybe follow runmanTX's advice and keep everything central until the kids are older! lol