First Time Investment Options For Young Adults

Tom Sullivan, CFA, 1st Vice President - Department & Portfolio Manager

December 17, 2013

Growing Your Wealth

Articles

Frequently, parents of young ­­adult children ask us what they should be doing to impart financial responsibility in their children.­­­ Checking and savings accounts are one thing, but it can get complicated pretty quickly when investments get thrown in the mix. Other questions come up as well: How much do they need to start the account? How do they get money to and from the account? How much will it cost? How can they be protected from being taken advantage of?

The answers, fortunately, are quite simple.

A couple years ago, Union Bank partnered with Betterment, a New York-based company with an investment solution for the masses, to create Simply Invest. Although we feel a Simply Invest account can appropriately fit the needs of many people, it’s particularly adept at addressing parents' concerns about their children's financial well-being. Here’s a breakdown of some of the reasons I think a Simply Invest account is the perfect first investment account for a young adult.

  • It’s simple to use. Accounts are set up and accessed online. Money is sent back and forth from the Betterment account to a checking account at no charge. Additions to the account can be set to automatically occur weekly, monthly, etc. There is no minimum to open an account.
  • It’s not a “forever commitment.” Funds can be added directly from your checking account AND you can pull funds back into your checking account. Again, there is no charge for moving funds.
  • It’s low-cost. Typical brokerage accounts can run up to 2.00%, with sales charges of 5% or more possible. Some institutional accounts (large business, foundation, endowment, pension-type account) pay 0.50% to 1.00%. At Betterment, the fees range from 0.35% on smaller balances to 0.15% on balances above $100,000! Those are extraordinarily inexpensive fees for a professionally-managed account.
  • Arguably the best portfolio. Betterment completely eliminates the need to try to pick stocks or funds. With a Simply Invest account, there are only two choices: more risk or less risk? That’s it. Betterment takes care of building a well-diversified portfolio of passive (indexed) stock and bond ETFs.
  • Multiple goals: Customers can create multiple “goals”, or buckets of money. Possible goals may be retirement, wedding, home down payment, new car, etc. Each goal can have a different allocation between stocks and bonds, as different goals have different time horizons. Progress toward each goal is also tracked.
  • Financial advice: The Betterment site has an advice section that will point you in the right direction to meet your goals. Betterment will recommend an allocation between stocks and bonds for you, as well as the amount you’ll need to put aside monthly in order to meet the goal.

For more information, please visit www.ubt.com/simplyinvest

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This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.

Investment products: Not FDIC Insured - No Bank Guarantee - May Lose Value.

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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Betterment’s charges and expenses. Betterment LLC and Betterment Securities are not banks and the investments offered by them are not guaranteed or insured by Union Bank and Trust. Union Bank & Trust is not affiliated with Betterment LLC or Betterment Securities.

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