Kinda a crazy question...

[DarkBuddha]

This is almost entirely theoretical, but I wanted to get some folks' opinions...

Am I completely nuts to consider the possibility of buying a "collector" car as an investment for my kids with their savings?

My kids are 4 and 7 and they have a healthy chunk of change from birthday and other holiday gifts sitting in a bank savings account that earns next to nothing in interest. I can't help but think there has to be a better way to invest their money for their future and earn a better return than the less the 1% they're earning now. We've considered CDs and other conventional investment instruments, but the rates are so insanely low that we find it difficult to justify committing the money for the kind of time periods that most of those instruments require. So what to do? Maybe buy a nice air cooled Porsche 911 before they boom. Or a cheap Ferrari?

So what do y'all think?

[Nessumsar]

A car would not be my first choice of "investment", nor would anything else that requires someone else's demand to get my money back. Not to mention the upkeep on a vintage car over the next 14 years...

[NJSPEEDER]

If the idea is to have money put away for college then I would suggest something that is safer and a better tax shelter.

The idea of an investment in a cool car sounds fun but the market is very irradic. Just look at the swings in what has brought the big money in the last 20+ years, brass era was hot in the 80's, early and mid year exotics the choice of the 90's, and the current waive is muscle cars.

There is also massive potential tax exposure(especially with the current trend the feds are feeding towards taxing people based on total wealth, aka, including what you own in your tax bill) from having something like that as well as the expense of proper storage and maintenenace for the 10+ years while you wait to use the money as intended.

-Tim

[evostilo]

If u get a good solid rust free car/Shell for dirt cheap, that is high desiered and leave it that way for yrs and resist the earge to fix it im sure that Shell/Car will be worth a bit more 10, 15yr from now.

Nothing expensive or in daily driver conditions!

[mc84_zz4]

I had a friend take out some of his kids college savings and buy a gorgeous 66 mustang convertible, red on red, 289 auto, and continued to restore the top, interior, etc.
He won several trophies, cruised with his wife & kids in it for 10 years, and made a lot of great family memories.
When he sold the car, he made back every penny he invested, and a little more, he calculated a 5-10% ahead of the investment accounts, but not every story ends that way.
It can be done if you find the right car to start with AND the market is still in an upswing.

[DarkBuddha]

It is kinda crazy, isn't it. You have good points about the tax issues and upkeep/maintenance. I think the tax issues would be significantly lessened if the car was part of a trust for the kids, or owned by the kids themselves (is that even legal?). Besides, I'm not sure how owning a collector car would effect our tax status versus the cash just sitting in an account? We're not wealthy folks by any means... no new cars, unhealthily in debt, a modest house in a decent neighborhood, living paycheck to paycheck... basically your typical thoroughly middle class household. The coin the kids have is strictly from gifts from their birth onward from family, friends, etc. They're much much much better off than my wife and me in terms of savings.

BTW, I was thinking of buying something that has decent growth potential and a strong following, which is why I mentioned Porsche and Ferrari. Muscle cars are strong right now, but so are a lot of other cars... watch auction prices and sales of stuff like '50s and '60s vintage British and Italian cars like Austins, MGs, Alfas, and even Fiats. And prices for 356 and early 911 Porsches and 308 Ferraris have shown good growth recently. The only question would be what would be next that is currently slightly behind the curve still. And yeah, I'd definitely want something in good condition that required nothing more than regular maintenance and safe keeping.

BTW...

A car would not be my first choice of "investment", nor would anything else that requires someone else's demand to get my money back.
What would be your first choice for investment? We're open to suggestions.

[NJSPEEDER]

Look up information on a 529 saving plan. It is a way to save and invest tax free when planning for college.

-Tim

[MrQuick]

Look up information on a 529 saving plan. It is a way to save and invest tax free when planning for college.

-Tim i agree...cars are not good investment choices.

[Tony_SS]

Don't screw up your kids' savings. Let them do that all themselves when they're 18. lol.

I think if you buy a mainstream muscle car, it would be a great investment. They have intrinsic value. And with the value of dollar always sliding down, it's something that will always take more and more dollars to buy.

Something else to look at are precious metals. Gold and silver are a great hedge against inflation. There no sense in keeping your money in the bank, earning 1% when real inflation is 3-5%.. you're sort of going in reverse there.

[NOT A TA]

Just a thought. Borrow the money from your kids and pay off some of your own debt? Then pay back the money to the kids account including the intrest as you would otherwise continue to pay your creditors. You will look better financially, kids will earn a much higher intrest rate than any type of savings, and you would not incur any additional expenses associated with a vehicle. Do not increase your own debt until the kids are paid off, at that point take another look at how to manage the kids money again as conditions will have changed.

[Tony_SS]

Just a thought. Borrow the money from your kids and pay off some of your own debt? Then pay back the money to the kids account including the intrest as you would otherwise continue to pay your creditors. You will look better financially, kids will earn a much higher intrest rate than any type of savings, and you would not incur any additional expenses associated with a vehicle. Do not increase your own debt until the kids are paid off, at that point take another look at how to manage the kids money again as conditions will have changed.

Great idea John. It would take some serious discipline and restraint. Something most of us don't have!

[Ron.in.SoCal]

Look up information on a 529 saving plan. It is a way to save and invest tax free when planning for college.

-Tim

^ this


Just a thought. Borrow the money from your kids and pay off some of your own debt? Then pay back the money to the kids account including the intrest as you would otherwise continue to pay your creditors. You will look better financially, kids will earn a much higher intrest rate than any type of savings, and you would not incur any additional expenses associated with a vehicle. Do not increase your own debt until the kids are paid off, at that point take another look at how to manage the kids money again as conditions will have changed.

^ and this.

The general concensus is if the economy really goes south, like US debt default, the dollar sinking, and soem form of hyper inflation (think Greece on a Global scale) is that luxury commodities will be worth zero. Low to mid level art, collector cars, etc.

Do it for the love if you can swing it and really want to. I'd also add that my buddy bought a beautiful 66 Mustang for his daughter. She drove it like two times when she got her license and he ended up selling it years later at a loss. Moral of the story as Vince said above, too risky...

[wmhjr]

No friggin way. Cars are not investment instruments. If you are very lucky and all stars align, it's possible that you can make far more than earning interest with the right car, the right buyer, the right economy and the right luck. It's far far far more likely that at best you'll keep up with inflation. Having observed "collector" car transactions over the past couple years, it's way more likely that you'll lose their tuition. I'll admit that I'm terribly pessimistic about our economy for at least the forseeable future and believe that our economy will never return to what we'd like. Cars are cool and I have nothing against buying or building what you want, but also believe that you need to consider it a luxury and a sunk investment. If you ever think you'll need to get the money back out, don't buy.

[DarkBuddha]

You guys have hit all the points I've been mulling over. As much as I like this:

Just a thought. Borrow the money from your kids and pay off some of your own debt? Then pay back the money to the kids account including the intrest as you would otherwise continue to pay your creditors. You will look better financially, kids will earn a much higher intrest rate than any type of savings, and you would not incur any additional expenses associated with a vehicle. Do not increase your own debt until the kids are paid off, at that point take another look at how to manage the kids money again as conditions will have changed.
We've agreed that there is no way we would use the kids money this way. It has risks that go way beyond buying a collector car... for instance, if my wife or I lose our incomes (for whatever reason), then the kids are straight up screwed. If we buy a collector car and we lose our incomes, then at least we still have the collector car.

The point about losing money against inflation is exactly why I even considered the remote possibility of buying something as an investment now (whether it's a car, real estate, etc.)... the money we spend now is worth more than it will be later. We have considered buying a house with the kids's money as a down payment, and then paying the remaining mortgage by renting it out until the kids are old enough to either decide to live in it, keep it as a rental property, or sell it to pay towards college (or trade school, or whatever). But given that home prices are either too erratic or outright declining still locally, it's tough to commit to that idea either.

Maybe it's just time to get the kids' properly invested with an investment agent/company (which is just mind boggling considering my wife and I don't have any investments of our own). If they see 2-4% over the next 15-20 years, that would be better than letting it sit now, right?

[ErikLS2]

Check out http://www.savingforcollege.com/ the Utah plan is one of the better ones last time I looked into it.

[Tony_SS]

You guys have hit all the points I've been mulling over. As much as I like this:

We've agreed that there is no way we would use the kids money this way. It has risks that go way beyond buying a collector car... for instance, if my wife or I lose our incomes (for whatever reason), then the kids are straight up screwed. If we buy a collector car and we lose our incomes, then at least we still have the collector car.

The point about losing money against inflation is exactly why I even considered the remote possibility of buying something as an investment now (whether it's a car, real estate, etc.)... the money we spend now is worth more than it will be later. We have considered buying a house with the kids's money as a down payment, and then paying the remaining mortgage by renting it out until the kids are old enough to either decide to live in it, keep it as a rental property, or sell it to pay towards college (or trade school, or whatever). But given that home prices are either too erratic or outright declining still locally, it's tough to commit to that idea either.

Maybe it's just time to get the kids' properly invested with an investment agent/company (which is just mind boggling considering my wife and I don't have any investments of our own). If they see 2-4% over the next 15-20 years, that would be better than letting it sit now, right?

You can't eat a classic car. ;) If you both lose incomes, can you repay debt with dipping into their fund?

The problem with investment 'professionals' is that they are few and far between. Ask them if they say the housing bubble coming?

I am still kicking myself for not buying gold when it was $900 just a few years ago.

Property used to be a good investment.. now, not so much. The correction is still taking place.

I still think a mainstream, factory muscle car is a good investment. A factory Chevrolet Malibu, a 442, GTO, anything of that nature, if its 'stock' is going no where but UP. Its collector art that has intrinsic value.

I also differ on college. I think it depends on the kid. It can be a debt trap for them. But paying a way for your kids college isn't teaching the value of an education. Let them earn it or take student loans in their name. Too often now kids have no concept of value or debt.

[pw2006]

My take is to invest the money in 529s. If you don't like the idea of 529s, and want a great diversified fund that helps hedge against inflation and US currency risks, take a look at PRPFX. I really like this fund. Low turnover, low fees, great returns, relatively low risk... here's a link. Just my $0.02.
http://www.marketwatch.com/investing/fund/PRPFX

[DarkBuddha]

The problem with investment 'professionals' is that they are few and far between. Ask them if they say the housing bubble coming?

...

I also differ on college. I think it depends on the kid. It can be a debt trap for them. But paying a way for your kids college isn't teaching the value of an education. Let them earn it or take student loans in their name. Too often now kids have no concept of value or debt.
It's funny you mention that about whether they saw the housing bubble coming... I think a lot of us who weren't on the inside saw it coming like a freight train. I know my mother (a real estate broker) and I had regular conversations about it coming for years before it happened. I actually predicted it (and our current resulting recession) to several people at the credit union where I worked between 2001-2006, including to management, and they all just played it down and dismissed it. It wasn't hard to see unless you were one of the ones that was making money off of it or were the ones in the overpriced, over-mortgaged, over-extended houses and loans. It's the reason my wife and I didn't buy a house in Seattle during that time even though we could have.

And I'm not completely in disagreement with your views on college... a lot of kids don't appreciate it or how much it costs, especially when it's paid for by mom and dad (or whoever). That said, my wife and I are way over-educated types and I'm currently in dissertation on my doctorate, so my views on the value of university level education are pretty militant, but not in the "a college education is valuable" sense. But rather: "Not everyone should go to college, and you shouldn't go to college because mom and dad or whoever says so, or because you think you'll get a job, or any of that crap. In fact, most kids that go to college out of high school shouldn't. You should go to college when you've figured out that there is something taught at university that you wanna know everything about and you think it's worth what it costs to go. Be prepared to take it seriously, leave the party crap out of it, and forget trying to have a life or hold a job at the same time you're going. When you're that committed, only then should you go. Otherwise you're wasting your time, your (or mom and dad's) money, the prof's time, and you're diminishing the value of the university education you're trying to get. If you're gonna do that, please don't go to college." That's my kinda militant.

As for my kids, I not concerned if they don't go to college. If they choose to (and meet my criteria), they'll have some money to go. If they choose not to go, they can have access to the money when they've found the way they want to invest in their future, whether it's starting a business, going to a trade school, do some serious traveling, or whatever. And if they make it out into the world on their own past say age 27 or 28, then maybe they can just have the money to buy an old Porsche or whatever. ;)

[go-fish]

The only automobile that I would feel safe buying as an investment would be a pedigreed vintage race car (i.e. not a car that someone bought as a daily). Maybe a Porsche 356 or higher level of exotic, I'm not talking Countach or Ferrari 308 here. I doubt your kids birthday money equals what it would take to buy the kind of car a realist would see as a sound investment.
If you want invest the money in alternatives other than a 529 I would look at land or ammunition. Ammunition has gone up more than gold since November 2008! LOL, and they aren't making anymore land.

[Happyfunballs]

Look up information on a 529 saving plan. It is a way to save and invest tax free when planning for college.

-Tim


Ding, ding, ding, we have a winner.

[69Pony]

Check out http://www.savingforcollege.com/ the Utah plan is one of the better ones last time I looked into it.

yes - do this or look into the Alaska 529 fund. My company runs both of them and they are very successful. Another investment would be municipal bonds. They are paying 4-5% and are fed tax free (also state tax free if you live in the state). However, you live in FL which has no state income tax so no worries there. Look into the MD / Johns Hopkins aux bond funds or the Maryland UM hospital bond. Both are paying north of 4% and tax free. You may need a broker to find them for you - my guy at RBC is real good at finding me 5% bonds with AA or better ratings.

[chops101]

If you do not know how to invest wisely, do your kids a great favor and seek out a competent investment advisor / financial planner.
Even thinking about "investing" in a car, which you're only fooling yourself if you believe it as an investment, is like investing then in a boat, investing in golf clubs or investing in fishing rods.

[DarkBuddha]

Even thinking about "investing" in a car, which you're only fooling yourself if you believe it as an investment, is like investing then in a boat, investing in golf clubs or investing in fishing rods.
I think you're implying that I would use the car I invested in. Fact of the matter is that the kind of car I'd buy wouldn't be the kind of car I'd either enjoy driving or in fact, be able to sit in. I'm 5'11" and 350 lbs... I don't fit in the kind of vintage euro or sports cars I was considering. And I'd most likely entrust it to the local museum for safe keeping (and storage) as a long-term loan.

But it's a moot point anyway. I knew it was kinda a crazy idea and you guys just confirmed so. I don't wanna risk their savings, but I sure as heck wanna see it grow faster than 1% a year. And I've made the decision that if I'm going to spend a decent amount of money on something significant, I'm going to buy something that has investment potential. For example, we'd like to buy bedroom furniture (we've had a bed and some metal garage shelves for the last 12 years), so I'm looking at legit antique Art Deco and Art Nouveau pieces (while they're still reasonably priced), mainly because we love them and because I've watched their values continue to grow and grow for the last 20 years.

[406 Q-ship]

Wyatt, I would look at the 529's (I believe Florida has one too) rather than investing in a car. Everyone thought that housing was a safe investment......well that turned out not so good. I am of the opinion (please don't take offense) that unless your very wealthy, that the kids need to pay for their own college/trade schools. You and your wife are going to be close to retirement as the kids get done with college and you will not have the time to recover that money for your own long term. It is not the responsibility of the parents to pay for college, put them up in your home and feeding them is as far as a parent needs to go after they are out of high school but only if they go to school.

If you are set on paying for college, then look at the deal where you start putting money in a college. Some of the colleges have a deal where you buy school time at todays tuition for future student, kind of like making funeral arrangement before dieing. Look at Suzie Orman's website about this, I believe she does information on this.

[ErikLS2]

You don't have to buy a 529 plan from the state you live in, you can buy one from any state and use it the money at any school. Some states offer their residents a tax break for buying a plan in their home state. It's better for most to pick the best plan for them regardless of what state it's in. Some offer many more options than others.

[DarkBuddha]

After this weekend, I'm going to contact USAA financial investing department and look into a 529 and other investments. My wife and I are not wealthy, and both of us have significant student loans of our own from paying for undergrad and grad schooling, so we know that side of things well. As I said before, the funds the kids have is gifts from family and friends since their birth... we buy their toys, their clothes, summer camps, etc., but monetary gifts go into their savings and it's theirs and theirs only. If/when they go to college, I hope they'll get scholarships/grants/workstudy/etc., but they'll have their savings to help; beyond that, they'll likely have to look at student loans. I'm actually hoping to have a teaching gig at a state/county college/university eventually, and many schools offer free or heavily discounted tuition to the children of faculty members, which would be awesome (and ideal). But we're still at least 10 years from that yet.

[dadto2jays]

Only if I would had bought several 69 camaros during the 80's even in todays ****ty market I would had quadrupled my money so I would say buy something not too over the top and at worse case scenario you are still going to earn more than the 1% banks are paying today. I would not spend ALL their money but I would spend at the most half.

Let us know what you finally buy..

[rustomatic]

Cars are always a losing bet, unless you're Reggie Jackson. Even Mr. Baseball has lost a few wheelbarrows of money on a car over the years. Cars burn money, and unless you own a hermetically sealed museum, the decay alone will kill the thing, which means that you'd have to drive the thing. We all know where that gets us...

It's time to hit the books and study investment strategy. Completely avoid the financial planning section in the book store, as it's all crap. Go for the hard MBA finance books, and you'll be on the right track. Listening to a stock broker tell you what to do with your money is like listening to a car salesman tell you what to do with your money; the answer is always the same, and always aimed for a toilet. Just thought I'd throw out some cheer.

Oh, hey, one more thing: There's a guy in South Lake Tahoe (CA) who literally has a yard full of XR4TIs. It's the weirdest thing, but then again, I worked for a guy once who collected Torinos...