How should I invest my sons money from his dads death?
Q. My son receives Social Security from his fathers death. The money is just sitting in a savings account doing nothing. I have two 529s already opened for him. One is from family and friends after the death and another is directly from my paycheck. I have $500 directly transferred to my checking once a month for incidentals. There is about $16,000 in savings right now. Ive moved large amounts over to the 529 in the past but I dont want to put more money there. Id like to set something up for long-term growth that he cannot touch until hes made his own way in whatever path he chooses. We have no money issues. I know zero about money and investing.  Parent  A. Were sorry to hear about the death of your sons father. But its good to know you are taking a proactive approach to your sons financial well-being. Before you make any decisions, there are many issues you need to consider, said Peter McKenna, a certified financial planner with Modera Wealth Management in Westwood. You need to take into account your sons age, when the Social Security payments will end, how much youve saved in the 529 plans, what you expect college will cost and whether he will be eligible for needs-based financial aid, McKenna said. But here are some starting points. Your son is not yet an adult, so he cannot open his own investment account, McKenna said. Instead, you can open a custodial account for him, make decisions as his custodian until he is the age of majority, at which time he legally becomes the owner and decision-maker on the account, he said. But this may not be ideal for a few reasons. It is rare for someone that age to have the maturity and experience to make sound financial decisions. Most of us, myself included, can look back on some decisions we made at 18 that are shockingly bad in hindsight, McKenna said. An account in your sons name could also have an impact on any need-based financial aid he may be entitled to in the future.  You may want to consider opening an investment account in your name and when you are comfortable that he can handle the responsibility, you can gift the assets to him, McKenna said. I think low-cost brokerage firms such as Vanguard and Schwab would be good options for either account type, he said. Once the account is opened, you need to decide how to invest the funds. There is a relationship between the return you expect to earn and the risk you need to take to get that return, McKenna said. The amount of risk you take is a function of when the funds may be needed and how the decision-maker on the account, you and eventually your son, will react to a bad market environment.  If the time horizon is five years or less, very little risk should be taken and low returns should be expected, he said. If the funds wont be needed for 10 years or more, more risk can be taken to try and grow the principal balance. But remember: markets can, and do, fall precipitously at points. It is critical that we prepare ourselves for these inevitable market events and only take as much risk as we are willing to maintain through these events, he said. Once you identify the amount of risk you are willing to take, McKenna said, there are a number of good low-cost exchange-traded funds (ETF) that you can purchase commission-free to achieve that target risk, he said. The manager of an ETF will manage the risk level to a relatively constant level so that you dont have to, he said. The commission-free feature is helpful if you will be adding money over time.  This do-it-yourself (DIY) approach may not be appropriate for you as you stated I know zero about money and investing, McKenna said. If you want to pursue the DIY approach, you owe it to your son and yourself to become more educated about personal finance, McKenna said. He recommends you read I Will Teach You to Be Rich, 2nd edition, by Ramit Sethi. Another option is to decide to work with a financial adviser who can help you develop a more comprehensive approach to your familys finances. McKenna offered this link from the National Association of Personal Financial Advisors which offers some tips on how to find one. Email your questions to Ask@NJMoneyHelp.com. Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.coms weekly e-newsletter.