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Savings advice

Savings advice

Old Sep 8th 2012, 11:44 am
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Default Savings advice

Hi, can anyone share their experience?

We have just transferred our savings from UK and would like to put money away for the kids, I am thinking around $10000

However I can't find any accounts that make any interest! I really can't get my head around how savings work over here, is it more usual to make investments in stock than have a simple savings / bond account?

Does anyone know what the nearest equivalents are to an ISA or a bond, I was hoping to make a few percent interest at least.

Just wondered if anyone could share any advice before I visit a financial adviser and pay a lot in fees???

Thanks, Alison
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Old Sep 8th 2012, 12:45 pm
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Default Re: Savings advice

Originally Posted by alihouse View Post
However I can't find any accounts that make any interest!
Take a look at a CD - certificate of deposit.

Ian
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Old Sep 8th 2012, 1:36 pm
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Default Re: Savings advice

CD...but the rates are shit these days.
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Old Sep 8th 2012, 2:59 pm
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Default Re: Savings advice

If you want to save long term for the kids as in college fund, look into what is known as a 529. It's a type of investment account like a 401k. Better return than savings accounts.
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Old Sep 8th 2012, 3:16 pm
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Default Re: Savings advice

Originally Posted by sir_eccles View Post
If you want to save long term for the kids as in college fund, look into what is known as a 529. It's a type of investment account like a 401k. Better return than savings accounts.
I think there's a lot more to be said for using a Roth IRA as the container. 529s are very restrictive.
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Old Sep 8th 2012, 3:19 pm
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Default Re: Savings advice

Originally Posted by sir_eccles View Post
If you want to save long term for the kids as in college fund, look into what is known as a 529. It's a type of investment account like a 401k. Better return than savings accounts.
Still better to save for one's retirement as you'll be retired longer than they're in college and they'd be eligible for more scholarships/grants/loans if they didn't have college funds :/
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Old Sep 8th 2012, 3:22 pm
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Default Re: Savings advice

Originally Posted by Bob View Post
Still better to save for one's retirement as you'll be retired longer than they're in college and they'd be eligible for more scholarships/grants/loans if they didn't have college funds :/
With a Roth, you get the option of using the funds either way.
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Old Sep 9th 2012, 4:02 am
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Default Re: Savings advice

You won't find the same guaranteed interest rate accounts in the US that you get in the UK. CDs are the closest equivalent to UK savings bonds, but the rates are far lower. There also is 't anything like and ISA. The closest thing is a ROTH IRA, but that is for retirement savings and there are restrictions on withdrawals before 59.5.

Your best bet is to open an account with a low cost firm like Vanguard or Fidelity and invest in a mix of equity and bond index funds.
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Old Sep 9th 2012, 6:03 am
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Default Re: Savings advice

Originally Posted by nun View Post
The closest thing is a ROTH IRA, but that is for retirement savings and there are restrictions on withdrawals before 59.5.
It's more multi-purpose since you can always withdraw the capital without penalty.
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Old Sep 9th 2012, 12:31 pm
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Default Re: Savings advice

Originally Posted by fatbrit View Post
It's more multi-purpose since you can always withdraw the capital without penalty.
Yes, I didn't want to get into detail as I don't know if the OP's income will actually allow her to contribute to a ROTH and the max annual contribution would probably be $5k. But in general ROTH IRAs are an excellent way to save money for UK expats in the USA because their gains and withdrawals are tax free in the US and the UK. You can get at your contributions at anytime without tax or penalty, but any gains are subject to fairly complex distribution rules and potentially early distribution penalties.

For now I think the best way for the OP to proceed is to read the wiki over at http://www.bogleheads.org/wiki/Main_Page and open a regular investment account with Vanguard.
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Old Sep 9th 2012, 11:06 pm
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Default Re: Savings advice

x2 on the Vanguard account. I have a 401k, IRA and a general savings account (for everything I can't put in tax free) with them. There are some good dependable mutual funds in there with low fees. My savings are mostly in: the Wellington fund (60/40 stocks/bonds), Wellesley (dividend stocks and bonds) and the Total bond market index fund. These three came through the past decade pretty well considering all the shit we've been through.
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Old Sep 10th 2012, 12:19 pm
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Default Re: Savings advice

I have invested in 529 plans for my kids and have so far been happy with the returns and the tax advantages. I would recommend trying to avoid or minimize your dependence on parent/student loans to pay for college. One version of the 529 plan allows you to lock in at today's tuition rates. This can be a deal as tuition increases usually outpace inflation. Whether a 529 plan (or any other investment) is right for you, I cannot say as I don't know your financial situation and, even if I did, I'm not a financial expert. Consider consulting with a financial adviser.
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