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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: Roth investment questions Date: 7/19/2006 8:37 AM
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I'm looking at having my kids move their Roth IRA's from the local credit union to a couple of Vanguard funds, but I'm wondering if the fees will be too much given how much money the kids have.

The kids are 15. DD will have $3k in her Roth IRA after she gets paid this week, and DS will have $1k in his Roth IRA after he gets paid. I had thought that they needed $3k to have the minimum for a Vanguard fund, but I was mistaken because the STAR fund only has a $1k minimum.

Today, DD has her money in a money market, and she's getting around 2% interest. DS, however, is just about to make the $1k minimum to move to a money market, so his is still sitting in a regular savings account earning about a half percent interest. There just aren't that many choices when you have so little in the account, and are only adding a couple hundred dollars per year.

I'm looking at Vanguard Total Stock Market Index for DD, and for both kids, the fees will be $10 per year account maintenance til they have $10k in value, which will be a while, and $10 per fund until the fund has a $5k value which will probably be a few years, at least for DS.

My kids put 100% of their earnings into their Roths right now, and I have just started matching what they put into their Roths so that they actually have spending money from their paycheck, particularly as they are now 15 and will be driving in another year, so will have more expenses. However, it's not like they will be making enough in a year to even max out their contributions.

So my question is if it makes financial sense to do this for both of them since it will cost them $20 per year for account maintenance fees which will chew up some of their money. With money market interest rates rising, I'm wondering if I should just move DD over and wait til DS has something closer to $3k at which point I'd put him into the Total Stock Market Index as well.

I've run some numbers, and it seems to make sense to move the money over because they will be adding to it, and over the long term, I am confident that it will grow.

I'd be interested in others' thoughts on if I'm giving the kids proper guidance.
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