Best way to set aside $1000 for each grandchild?

I just inherited a small amount of money, and want to set aside $1000 for each of my grandchildren. It must be done in some manner that their parents CAN NOT access the money, and the children can't touch it until they are 18 if they go on to higher education or 21 if they don't go to college or tech school. A ROTH IRA is out because they MUST go to college to get the money with that one. Naturally I want the money to have as high a return on the investment as possible, but I don't want the kids to have to pay a bunch of tax when they cash it out. Someone suggested savings bonds, but those are something that can't be restricted from being accessed by their parents or before the desired age. Suggestions???? What have YOU done?

Just set up a basic savings account in your name and the childs name and you can state that the child isn't allowed to access the account (Tell them at the bank) until he/she is 18/21. This way the parents can't touch the account, because their names aren't on it. My grandparents did this for us. Call your local bank/credit union and check it out. This way it would be gaining interest until they reach the allotted age also.

A Roth IRA has nothing to do with education. They don't have to go to college to get it.

Open up a 529 account for each child with you as the trustee. You can reassign the account of any child not going to college to another child.

You may want to consider looking into a Section 529 Plan. This is a state sponsered plan that is designed to help save and plan for college. You can also sign up with UPromise which will also help set aside monies for college when you purchase a variety of specific products at your local grocery store. In addition with checking with your local bank, if you have an accountant that does your taxes or a tax lawyer, consult with them in regards to setting up trust funds for your grand children.

All of the previous ideas given are good. On a savings bond, can you put your name also? Then, in order to cash it, you and the child would have to sign it.

As for the age limit, I think giving the money to the child at 21 if they don't go to college is still a bit young. You might consider raising that to 25. When a kid is 18, they might think 21 isn't that far away (it's not) and not really work to become independent people thinking the money is just around the corner. Though it won't make them rich, young adults haven't always learned the value of a dollar.

I've seen this exact thing happen. A boy I knew (15 yrs ago), chose not to go to college, but didn't care. He knew he had "lots" of money coming in the near future. When he turned 21, the money (ca. $25,000) became available to him. It was gone in less than six months... new car (which he wrecked immediately), new clothes, lots of parties.... nothing to show for it.

Don't be so adverse to "have to pay a bunch of tax when they cash it out." Having to pay a bunch of tax just means the investment made a LOT more money than savings bonds, muni bonds, or other low tax/low return investment. Check with a financial planner to set up a trust with the restrictions you desire.

Go talk to the bank. They will have several options, balancing risk/reward/flexibility. I'm thinking a mutual fund, CD, or bond. However, $1000 in gold might be interesting (but, it's more effort to redeem). Or, you could buy them $1000 worth of Google stock.

I would use a financial planner in my area. I would use a certified ELP (endorsed local provider) from DaveRamsey.com. I agree with the way he thinks and teaches about money.

I would NOT do savings bonds. They have HORRIBLE rate of return. If you want it for college/tech school look into a UTMA.

From Dave Ramsey's website:
Open a mutual fund in the child鈥檚 name. A Uniform Transfer to Minors Act (UTMA) will allow you to open the mutual fund in the child鈥檚 name that will be taxed at the child鈥檚 rate without a cap. Others can add to this fund as well. The child will get the money when he/she turns 21.

You could also open an Educational Savings Account (ESA) which allows you and other relatives to put in up to $2,000 a year as long as the child鈥檚 parents don鈥檛 make more than $200,000 each year. The ESA grows tax-free, is very flexible and I鈥檇 recommend that you do that with the first $2,000.

The next thing I鈥檇 recommend is the 529, which allows you to select and move the mutual funds within the 529. Make sure you get this flexible type of 529. You can contribute up to $10,000 a year or $50,000 as a one-time estate planning contribution.

Set up a Trust Fund.

Buy Treasury Bonds.

or

Do what the young lady said about setting up a children's Savings Account with your name and each of theirs. You can deny them access without your approval until the agent of 18 or so. I did that for my niece.

Good Luck.
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Your best bet is to log onto www.SUZEORMAN.com. She has what she calls a "Will & Trust" kit. It's basically a CD that asks you a few personal questions and then spits out your will for you. You then take it to your local bank or credit union and have it notarized and you're done! For $13.50 it's by far the easiest solution to protecting your assets! You might also consider setting up a living revocable trust while you're at it (which is also on the CD). If you just have a will, your beneficiaries will have to pay probate fees which, depending on your estate, could run up into the tens of thousands and they won't receive a dime until it's paid in full!! On the other hand, as long as you fund your living revocable trust (which means that you change the name on your house deed and savings/checking accounts from your name to the name of the trust), you can pass along your assets to your loved ones with minimal fees & taxes. Best of luck!