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My son, 8, was given $35,000 in gold. Do we keep it — or invest the money?


I did not grow up with any wealth and I am only now, in my 40s, and beginning to understand how to invest and save for retirement for myself. 

However, with everything I’ve learned, I am trying to ensure my child will be in a better position and have knowledge and opportunities that I did not have. 

For several years now, he has one section of his piggy bank for both saving and investing, and one for spending. At least once a year we count that up and it goes into high-yield savings and a custodial investment account (primarily in ETFs). 

Here is my dilemma: he was gifted gold by a generous friend of the family. These bars are safely stored, but cannot be insured. Today, the gold is worth just over $35,000. I am not sure whether we keep this gold or if we should get the cash value and invest it differently for him. 

He is only eight, so there’s a lot of time for compounding. I realize there’s no crystal ball, but I assume there may be a general consensus in the investment community on liquidity/investments versus physical gold. What is the best way to utilize this gift for his future?

The Mother 

Dear Mother,

This is a good time to invest. Money you invest broadly in the stock market today for your child will experience the miracle of compounding over coming decades. 

Gold is a raw material. It’s a hedge against inflation and it’s always good to diversify your portfolio. Gold, like silver and other commodities, may go up (or down) in value, but it does not yield dividends, it pays no interest and, unlike real estate, it will not provide a roof over your head or long-term income. It’s nice to look at, nice to hold, but if you want to build a viable nest egg, you’re better off avoiding gold. 

Your eight-year-old son will benefit from the growth of his capital investment over a long period of time. Over the past 30 years, the SPDR S&P 500 ETF Trust
SPY
has had an average annual total return (after expenses and with reinvested dividends) of 9.6%, according to FactSet. If you invested $35,000 in the stock market today at a conservative annual return of 7%, he would have $249,000 after 30 years.

Gold is traditionally seen as a safe haven: it’s not typically vulnerable to the wild ride the stock market experiences, and people turn to this commodity when they are uncertain about the economic outlook. You may wish to keep a small percentage of this $35,000 in gold (10% or thereabouts, according to this recent fascinating analysis on MarketWatch) but you owe it to yourself and to your son to do something with this money when time is on your side.

Under the Uniform Gift to Minors Act or Uniform Transfer to Minors Act, you can open a custodial brokerage account for your child — a Roth IRA, where the contributions will grow tax-free, ABLE account or 529 tax-advantaged account for college expenses — and all the income from those accounts will belong to your child. Your son will ultimately take control of the…



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