Investing for Children

We have 4 grand children that we have been purchasing stock for at Christmas for the last 10 years. The stocks are valued from $500 to $3,000. The brokerage house fees were running too high even though we had them under our account. We have just liquidated the accounts and our goal is to look for the best place to invest this money and continuing our yearly $150 contribution for each.
Rich

Rich is right. Investment expenses matter. The Securities and Exchange Commission calculates that a 1% difference in expenses on a $10,000 investment earning 10% annually would mean a difference of $11,133 in 20 years. Rich isn't investing that much, but clearly the difference is dramatic.

And Rich is also right that beginning a savings program for children is a great idea. For instance, a public college that costs $12,841 per year today would cost $36,652 in 18 years if costs rise 6% per year.

There are two things for Rich to consider. First, how will he invest. And, second, how will the investment be legally owned.

Best Investment Options

Owning individual stocks is very hard unless you're going to be investing more than $150 at a time. Even a minimal $8 commission reduces your $150 investment by more than 5%. So it takes 6 months or so to earn enough to make up for the commission paid.

Generally, mutual funds offer more flexibility for the small investor.

The average expense for a mutual fund that invests in domestic stocks is 1.4% per year. That's a whole lot better than the cost of buying individual stocks.

Owning a mutual fund allows you to reinvest dividends. Something that's almost impossible with an individual stock unless a DRIP (dividend reinvestment plan) is available. If a DRIP is available for your stocks in this situation it would be wise to use it.


Funds

Rich will want to consider something called an 'index' fund. Those are funds where management does not try to pick stocks that will beat the market. The fund is managed so that it reflects the make up of an index.

For instance an S&P 500 fund would have shares in the same proportion that they were in the S&P 500 index. Shares would be bought and sold to maintain that proportion.

There are two main attractions to index funds. One is that their expenses can be lower. For instance, the Vanguard S&P 500 fund has an expense ratio of about 0.18%. But check the expenses on any fund. Some index funds have ratios as high as 1.5%.

The index funds also generally perform better than the average managed mutual fund. As it turns out, most managers don't earn more than they charge the fund. And that means that the average fund does not perform as well as the market.

If you are going to consider a managed fund, look for one that has a good 10 year track record. A great one or five year track record could have been caused by some unique factors that had nothing to do with the fund's managers. And, that could actually work against the fund once you've bought it.

How should the investment be owned?
Ideally, Rich would set up a UGMA (uniform gifts to minors account) for each child. He (or any legal adult) could act as custodian until the child became an adult.

Because legally the child owns the money, Rich would not be liable for any taxes on dividends or capital gains. The one disadvantage is that the child can use the money however they choose when they reach the age of adulthood.

Using a UGMA account has another advantage. As they become old enough to understand, you can review the quarterly statements with them. It's a perfect opportunity to teach them the basic facts about money.


Talk to Your Kids

There's another, non-financial benefit of talking to your kids about their investment account. Often children strive to achieve our expectations for them. Knowing that you're saving for their college could encourage them to strive for the grades that they'll need.

Rich might also encourage his grandchildren to add to the fund themselves.

Kids often receive cash gifts. If they take just a small portion of each gift and add it to their investment account they'll take a keener interest in the account. And, they'll learn how to be investors.

Finally, one of the most valuable gifts that you can give a child is an understanding of how compound interest works. There's a huge gulf between people who are paying interest on credit cards and those who are collecting interest on investment accounts. Getting on the right side of that gulf is important.
Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website . The site have hundreds of ways to help you stretch your day and your dollar. Visit today!

How Much is Enough?
Living with an Open Hand

Why Me

"Boy, God must really be gunning for you!"

As the tears began to stream down my face, I was grateful we were working in the relative darkness of an ultrasound room. The comment made by a nurse was simply an off-handed remark. The words themselves were harmless, but they gained power and cut deep because they echoed the feelings that were surfacing in my heart.

Why was God allowing illness to destroy my life and career?

For one more day, I had struggled to get to the hospital in time for noon-hour scans of patients suffering infertility. On the way to the hospital, I was rear-ended by a man who, "thought the red light was green." As a result, I now had a whopper of a headache--which compounded the suffering I was already experiencing from chronic illness.

That day, it was all I could do to sit and make notes in charts, to smile at the patients--to try to pretend I was alive inside--when every part of my body felt like death and wanted death. Sometimes things happen in our lives that change us--and nothing is ever the same again. I often refer to those times as a "day of days," even though my own "day of days" lasted for three long, dark years.

It began the morning after I defended my master's thesis, when I woke up with a pounding migraine, the stomach flu and a cold. Initially, doctors and friends dismissed it as "the stress exorcism." They were sure that I only needed to relax and get rid of the stress that had built up throughout the past weeks.

But it never went away. And for the next eight months, frustration grew as I battled chronic illness and fatigue. I had some good days, but mostly I was exhausted. I always seemed to have the flu and my weight plunged from 125 to 92 pounds. Not long after, I was diagnosed with chronic fatigue syndrome (CFS), namely permanent fatigue and a depressed immune system.

The irony is that in spite of my sickness, my PhD research was extremely successful. As the first researchers in the world to observe and record the process of human ovulation, our studies gained national and international attention. Opportunities from all over the world were waiting for me. It seemed as though the success I had always sought was there, but I was too tired and too sick to take hold of it. And so, it was with mounting frustration that I realized I could not grasp the very thing I wanted most.

Being the typical "Type A" personality, I needed the challenge of my work to maintain my identity. When I couldn't work effectively, my self-esteem plummeted and depression soared. My relationships deteriorated because I was too tired to do anything and too angry to be near anyone--especially people who had the energy to lead a productive life. I could not function at the level I was accustomed to and, in my mind, if I couldn't do it all, I didn't want to live.

As a result, my heart became very dark. And my spirit screamed out to God--WHY? Why was I in such torment? If God had abandoned me to death, then let me die. But if I was meant to live, then heal me and let me function like a normal person.

For the first time in my life, I was unable to control my circumstances. And as I reached the end of my own strength, my only hope was to look outside myself for help--for something or someone who was much bigger than me.

Author and scholar C.S. Lewis says that pain is God's "megaphone to rouse a deaf world." It's true. I never looked to God much when I was healthy, successful, busy . . . able. I knew He was there, but it was only as I was stripped of all my resources that I really began to seek God and to cry out to Him from the depths of my heart.

Turning to God was the first step on my journey towards healing. Healing came as I gave up my frustration and anger about being sick and unable to do things that I wanted to do. Healing came when I realized that my self-worth was not dependant on my academic success or on my ability to do things. And as I acknowledged my inability to love myself when I was sick, I experienced God's love for me during my weakest moments. Healing came when I stopped fighting my circumstances that had been given to me.

Since then, I have had to choose daily to trust that God is still in control and that He will use this illness to accomplish His purposes in my life. For most days, I am able to trust that God's love and strength will be enough for me that day.

But there are also days when it is a struggle to trust. And those are the times when I am grateful for friends who remind me of the truth that God isn't any less powerful because of pain and suffering. He is able to heal miraculously and instantaneously. But we live in an imperfect world and it is only in acknowledging our suffering and our need that we are able to see God's tremendous power to restore.

Each step that I have taken on my journey of reconciliation with God has brought some degree of physical healing. However, I now consider God's healing to be a much deeper and more complete process than a restoration of the physical body. Ultimately, emotional and spiritual healing play the most significant role in enabling me to find contentment and peace in my life whether I am sick or well.

My battle with CFS is the hardest thing I've ever had to endure. And, although I didn't recognize it at the time, it was the beginning of a life-changing journey with God. That journey has changed my priorities and taught me to place my hope in God's power to accomplish things, rather than in my own talents and skills.

Take a look at your life. How would you describe it? Contented? Rushed? Exciting? Stressful? Moving forward? Holding back? For many of us it’s all of the above at times. There are things we dream of doing one day, there are things we wish we could forget. In the Bible, it says that Jesus came to make all things new. What would your life look like if you could start over with a clean slate?

Living with hope

If you are looking for peace, there is a way to balance your life. No one can be perfect, or have a perfect life. But every one of us has the opportunity to experience perfect grace through a personal relationship with God through His Son, Jesus Christ.

You can receive Christ right now by faith through prayer. Praying is simply talking to God. God knows your heart and is not so concerned with your words as He is with the attitude of your heart. Here's a suggested prayer:

Lord Jesus, I want to know you personally. Thank you for dying on the cross for my sins. I open the door of my life to you and ask you to come in as my Savior and Lord. Take control of my life. Thank you for forgiving my sins and giving me eternal life. Make me the kind of person you want me to be.

Does this prayer express the desire of your heart? You can pray it right now, and Jesus Christ will come into your life, just as He promised.

Is this the life for you?

If you invited Christ into your life, thank God often that He is in your life, that He will never leave you and that you have eternal life. As you learn more about your relationship with God, and how much He loves you, you'll experience life to the fullest.

If you have a question first, click here.

More on Chronic Illness:

Living With A.L.S.

10 Things to Consider Before Signing on the Dotted Line

Making the decision to build a new home is a thrilling prospect. For many, it is the realization of a dream. But many potential new home owners don’t realize that some of the decisions made after signing a contract would be less expensive and better negotiated if they researched their needs before inking the deal.

Her Home spoke to one woman who, in the process of considering her building project, took extra steps to research what she wanted. She ultimately saved thousands of dollars in “up charges” – changes or additions made by the builder once a contract is signed. Here are the ten items she considered before signing, and what she learned in the process.

1. Pre-qualify for a mortgage.

* Get credit information in order.
* Check out several lenders.
* Review needs for a construction loan or a bridge loan.
* Understand mortgage products; energy efficient, woman-centric aspects, etc.

“Pre-qualifying for a mortgage put my mind at ease. I knew how much home I could buy. I wanted to look for homes only within my price range.”

2. Review your present home and situation.

* Are room sizes adequate?
* What special needs do you have, such as a blended family or the need for a workshop?
* What furniture will you keep?

“My existing townhouse is great for entertaining. And the master bedroom is separate from the other bedrooms, which works well for my blended family. I wanted to keep most of my furniture, so the rooms in my new house will need to be large.”

3. Find a lot.

* Is it close to schools, church, shopping, health care, pizza delivery?
* What direction does the lot face?
Do you want morning sun? A special view?
* Do you want a sloping lot for a walkout basement?
* Study covenant and community restrictions.
* What is the tax levy?
* Look around the neighborhood.
What do you like? What bothers you?

“Trees are very important to me, and also a private backyard – so that I am not looking at my neighbor’s house. My location was also determined by good pizza delivery service!“

4. Find a home plan by asking the following questions:

* How do I want to entertain?
* How much storage will I need? What kind?
* Does the plan have flexibility for special rooms or situations
(exercise room, craft area, etc.)?
* How does the home help me de-stress? A quiet area for me?
Built-in organization like drop zones? Whirpool bath? Sunroom?
Porches?
* Where do I want the master bedroom?
* Is a healthy home important to me?

“Once I identified that I needed an open floor plan with a lot of space in the kitchen and great room, as well as divided bedrooms and storage space, finding a plan was a piece of cake. I walked through a number of model homes to get a sense of room-size proportions and went on www.HerHome.com.”

5. Select a builder

* Is there a builder attached to the lot you want? If so, interview him/her extensively.
* If not, interview several builders. Try to find someone with whom you’ll have good chemistry.
* Check references of the builder’s former homebuyers, subcontractors and vendors.

“My builder was attached to my lot, which was a big consideration, since I had to work with this person. I drove him crazy asking so many questions. But since this is a huge decision, I wanted to do it right.”

6.Consult with an interior designer for a couple of hours.

* Make sure everything flows; coordinate colors,
flooring and countertops; and plan placement
of outlets.

“The time I had with an interior design consultant was the best money I spent. I wanted a contemporary look, and she helped me coordinate flooring, countertops and colors. While I have a sense of my style, I am now more confident with my choices.”

7. Meet with an electrician and electronic specialists to pre-wire the house properly.

* Consider Christmas lights, other outdoor lighting, accent lighting, security, stereo surround sound, telephones, ample outlets and their placements, Internet and media rooms.

“I walked through the entire plan with an electrician to get advice on lighting, security, outlets, etc. This was time well spent, because I made sure the elements were incorporated before I signed the contract and avoided many up charges.”

8. Talk to as many people as you can who have been through the building process. Be sure to ask what they would do differently.

“I learned a great deal from the mistakes of others – which saved me tons of headaches.”

9. Customize your home plan.

* Make sure the working drawings are clear and exactly how you want them. Consult with an interior designer for a couple of hours.

“I did not want any ambiguity on my working drawings. I made sure everything was how I wanted it. I revised my plans many times; it’s worth the hard work to get what I want.“

10. Pack your survival kit.

* A sense of humor
* A 12-pack of patience
* Drawers of chocolate
* Bottles of aspirin
* A jump rope for de-stressing

“I’m ready to sign the contract and get started!”

Are you finding it hard to relax? Please email us your concerns


Lisa Albrecht is an account executive for Color FX (a large printing corporation) who is building a 2-story home. She likes to ride motorcycles and studies fine wines. This article has been reprinted with permission from HerHome.com