CNBC’s Jim Cramer said he thinks investors should start saving for their children as soon as they’re born, whether it’s index funds, individual stocks or both.
For a newborn, Cramer recommended parents set up a Uniform Gifts to Minors Act account, or UGMA.
“When a child is born, think about setting up a Uniform Gifts to Minors account, and put index funds or individual stocks in there,” Cramer said. “Specifically, I like cheap ETFs that mirror the S&P 500, and on the stock side, your kids will want at least one dividend stock, give them one dividend stock, for income because a high yield can double the value of that investment by the time your baby turns ten.”
Cramer said these accounts can be great ways to give children money relatively tax free, and they allow funds to accumulate over time. Cramer noted that rules for these accounts can vary by state and mentioned one caveat: UGMAs may affect the amount of financial aid a child receives should they decide to go to college.
If investors choose to buy individual stocks for their children, Cramer suggested ones with high dividends and high-quality growth stocks they believe might lead to big gains in the long haul. He also noted that gold is a “terrific insurance policy” in any portfolio.
“Don’t put this off. This must be done at the earliest moment to get the most time involved for your brand new loved one,” he said. “No one has ever regretted saving too early for their kids.”
Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer’s world? Hit him up!
Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram
Questions, comments, suggestions for the “Mad Money” website? [email protected]