We are parents of 7 week old twins. Although they aren’t old enough to even think about shopping, they had family members who gave them money for Christmas. Since they can’t spend it for themselves, it leaves us as parents with the dilemma of what to do with the money. Since they aren’t old enough for toys just yet, and the grandparents seem to be doing a pretty good job of spoiling them already, it seems like the appropriate thing is to somehow save it for them. The big question for us is how to save the money. Here are some options that we are considering:
- Open an ING Direct account – As current ING Direct customers, we could refer our kids as new account holders and they would earn a $25 bonus and we would get $10. The only catch would be that the minimum to earn the bonus is $250, and they didn’t get that much, meaning we would need to put up the extra money for them.
- Open a WTDirect Savings Account – WTDirect offers a higher interest rate than ING Direct (4.90% APY as of 12/25/2007), and as an affiliate I could earn a $50 commission for each account, which I would add back to their accounts. I have never actually dealt with them before, making me a bit more uncertain about this one. However, it could offer an opportunity to review the account in future blog postings.
- Open a Zecco trading account – Similar reasoning to the WTDirect Savings option. As an affiliate I could get a $35 commission on each account. I could deposit the money and purchase an index fund ETF and hold until they get older. Again, I’ve never actually done anything with them before, so it would be a chance to try out the service and provide a review here later on.
- Open a 529 plan for each of them – I plan to do this anyway, although I still need to do some more research on which plan is best. I would add their gift money to what we were going to contribute anyway.
Anyone have any better ideas? We aren’t talking about a large sum, so nothing crazy please! =)
Zecco doesn’t seem like it has a sustainable business model so, frankly, I’d wander away. While $0 trades are attractive, I ponder how many people will keep their money at Zecco and do enough business for it to stay afloat.
If you go with WTDirect, you’re definitely going to need to kick in some more money to get that 4.90% APY after the first 60 days: “After the first 60 days, the APY for the account will have two tiers: (a) a higher APY for accounts with balances of $10,000 or more (currently 4.90% APY); and (b) a lower APY for accounts with balances of less than $10,000 (currently 0.50% APY).”
Out of the three, I’d kick in the extra green and go with ING Direct. (Incidentally, I’m with HSBC Direct who has done me reasonably well so far, but has dropped to 4.25%) They’ve been around the longest, seem the most stable, and don’t advertise a “teaser” rate for high balances, while leaving the rest at the same rate my bank pays on interest-bearing checking accounts.