Custodial Account Funds- Schwab

SWPPX is Schwab's S&P 500 Index mutual fund.

Very low fees (.020%) and no loads or commissions to buy or sell.

EDIT: I've had my children's funds in SWPPX for over 20 years and this mutual funds does a good job of mirroring the S&P500 Index. If you sell units in the fund in order to raise cash for a withdrawal, the funds are available for withdrawal the next day.

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SWPPX

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Thanks. This was how I was leaning but wanted to hear some other ideas.

As for age, they are under 10. I understand at 18 I will lose ownership over the account and understand the risks. We don’t plan to disclose it to them and if they do discover it, it will be made clear that this is our contribution towards weddings/future. Just want the market to work for us in the mean time.

Why not use a 529? You can convert up to $35k to Roth IRA and Roth contributions can be withdrawn tax and penalty free. Custodial account will count against them on FAFSA more than parental assets too.

Yes, it is Federal law SECURE Act 2.0 enacted this change starting in '24. Fidelity: 529 to Roth rollover

Keep in mind the 529 to Roth “conversion” is only applicable up to yearly Roth contribution limits. In other words, you can’t convert a $50k 529 in one year. It would take at least 8 years at the current limits of 6.5k.

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We don’t plan to disclose it to them

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People always say this but how do you handle the taxes? After 18 they're responsible for tax on any distributions. Unless you invest it all in non dividend stocks there's inevitably going to be some annual tax liability. In the worst case scenario where you dont want the kid to have access because of poor life choices this could become a problem.

Saving for retirement is important for the future.
If you have enough for retirement, your kids won’t have to help you.

529 is probably a good idea. Can be used for college or converted to Roth(up to annual limits starting in 2024.

An extravagant wedding is a nice day, but some couples might prefer a smaller wedding. I guess you could gift the couple money over the years(up to the limit of the gift tax).

Make sure you max out your Roth first. You can withdraw your Roth contributions at any time. If you fully fund a Roth for twenty years or so you could withdraw $130 K to pay for weddings, or college, or whatever. If you will be over 59 1/2 at that time, you'd have full access to your Roth tax free. It makes absolutely no sense to save for them until you have done this, other, than of course, to teach them about savings and investing, but you wanted to keep this secret?

Alternatively, if you have plenty of money in an IRA now, convert a chunk of it to Roth. You can get it in five years if you are younger than 59.5. It will then grow for 20+ years and if you don't like the dude (hopefully) she picks, you don't have to give her anything and in the meantime the growth will be in your Roth.

Start a Roth for your wife also.

The Roth is a great fit to a situation like this because all alternatives use after tax money, so the tax implications are pretty much the same. The best solution might actually be to maximize your tax deferred 401K and IRA options, and then convert the money to Roth you anticipate needing at least five years before you need it. Gives you maximum flexibility, with maybe maximum tax advantage.