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How to Invest For Baby's Future

Reader Asks: How Do I Start Saving For My Niece's Future?

This question was posted by in our SavvySugar Q and A community group. She wants to know how she can save for her baby niece's future. I reached out to Andy Cross, the Chief Information Officer from The Motley Fool, the go-to website for investing, to share his expertise with us.

My niece was born six months ago. I want to begin putting away money, annually, for long term (18 years) for the baby. Suggestions? I was hoping to put in about $500 a year (maybe $1000 per year in 10 years or so) and try to make that as much as I can in 18 to 20 years. I would expect her to use it on college, or just to get her on her feet. I saw there are Educational IRAs, but I wouldn't want her to be forced to use it on education. What if she got a scholarship? Balancing my own budget isn't a problem. I am looking for suggestions on the best investment direction considering I would not need access to the money. I'm trying to get the best long term return.

To find out what advice Andy has to give, read on.

Wow, if only every aunt thought about their niece’s financial future that way. There are a few ways to invest for your niece’s future, but because you don’t want to limit your options to education, you may want to consider a custodial account under the Uniform Gift to Minors Act (UGMA) or you could just set up a regular taxable retail account in your name. Regardless, over the long haul (and 18 years certainly counts) we at the Fool think stocks, both domestic and global, will be the best way to create lasting wealth for anyone, including your niece. So think about some of your favorite stocks. Add a little through the year as you like and limit your transactions. Excessive trading costs can slowly eat away your profits that little Suzy will reap down the road. And remember, before setting up any custodial account, consult a tax advisor if you have any questions.

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Ask anything budget-, etiquette-, or planning-related — well, almost anything — by posting your questions in the Ask Savvy group or SavvySugar Q and A, and I'll find the right expert to help you out.

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