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Child savings account options
Posted on 6/20/24 at 8:32 am
Posted on 6/20/24 at 8:32 am
We had our first child earlier this year and we want to open a savings account for him. We do all of our banking with capital one.
A regular savings account is at 4.25% and a child's account is only 2.5%. I'm certain there is some kind of long term disadvantage to opening a regular account and trying to give the funds to my child when the time comes right? Otherwise, why would I open a child's account rather than just another savings dedicated to the child? Someone tell me all of the pros and cons.
A regular savings account is at 4.25% and a child's account is only 2.5%. I'm certain there is some kind of long term disadvantage to opening a regular account and trying to give the funds to my child when the time comes right? Otherwise, why would I open a child's account rather than just another savings dedicated to the child? Someone tell me all of the pros and cons.
3
Posted on 6/20/24 at 8:41 am to lsugrad35
Open a Vanguard UTMA acct.
Contribute $100/mo to VTSAX. Put any holiday or birthday money they receive in there as well.
My kids are 4 and 6. Have been doing this since they were born.
6 yo has 16,391.32
4 yo has 15,038.61
Contribute $100/mo to VTSAX. Put any holiday or birthday money they receive in there as well.
My kids are 4 and 6. Have been doing this since they were born.
6 yo has 16,391.32
4 yo has 15,038.61
Posted on 6/20/24 at 9:26 am to lsugrad35
Not sure of what the Con would be outside of if there are transaction requirements to get the interest rate.
As far as giving the funds, write them a check when the time comes...
We keep about $500 in our kids' savings accounts and everything else + $100 / month each goes into their 529's. Plan to dedicate funds to their college funds, now that up to a certain amount can be converted to an IRA.
I was debating between 529, brokerage account, and custodial account. ruled out custodial account since I can achieve the same thing with a brokerage account, but with more control. Then when the rule changed to allow 529 conversions we started sending all the funds to those.
As far as giving the funds, write them a check when the time comes...
We keep about $500 in our kids' savings accounts and everything else + $100 / month each goes into their 529's. Plan to dedicate funds to their college funds, now that up to a certain amount can be converted to an IRA.
I was debating between 529, brokerage account, and custodial account. ruled out custodial account since I can achieve the same thing with a brokerage account, but with more control. Then when the rule changed to allow 529 conversions we started sending all the funds to those.
Posted on 6/20/24 at 10:03 am to Brobocop
quote:
Open a Vanguard UTMA acct.
Contribute $100/mo to VTSAX. Put any holiday or birthday money they receive in there as well.
Is it taxed annually or when they cash out? My 16 year old is DYING to open an investment account, but I don't want him to get stuck owing taxes at the end of the year, and we're not in a position currently to regularly add to the account, so I'm not sure if the minimal amount he currently has saved up (a few hundred dollars maybe) is worth opening an account like this or not.
Posted on 6/20/24 at 11:49 am to LSUGUMBO
I was researching this today… believe they are exempt from any unearned income (dividends) up to 1250$ per year… anything over that you have to file taxes for them and it is taxed at parents rate.
I just opened one in my name for him, and I let my son help me and we talk about things to invest in, about 150$ a month. Then I make him google or YouTube the company to learn about them more. I don’t know yet if I could trust them in the future when account transfers into their name when the custodianship ends. And F potentially filing more taxes for a kid
If he has any earned income already then Id open a Roth IRA for Kids for him. Even if it’s just mowing yards, you can match his income into a Roth
I just opened one in my name for him, and I let my son help me and we talk about things to invest in, about 150$ a month. Then I make him google or YouTube the company to learn about them more. I don’t know yet if I could trust them in the future when account transfers into their name when the custodianship ends. And F potentially filing more taxes for a kid
If he has any earned income already then Id open a Roth IRA for Kids for him. Even if it’s just mowing yards, you can match his income into a Roth
This post was edited on 6/20/24 at 12:57 pm
Posted on 6/22/24 at 7:44 am to LSUGUMBO
The education would outweigh any tax concerns for me. Teaching kids to have an investing mindset is worth every penny. The account would be exempt on small earnings, though.
This post was edited on 6/23/24 at 8:23 am
Posted on 6/22/24 at 8:36 pm to Brobocop
quote:
Open a Vanguard UTMA acct.
Contribute $100/mo to VTSAX.
Is there a minimum to start the account invested in VTSAX like with an IRA?
I have a roth and traditional IRA with Vanguard. Can I transfer funds to the UTMA from one of these accounts?
This post was edited on 6/22/24 at 9:05 pm
Posted on 6/22/24 at 10:25 pm to Phate
quote:
I have a roth and traditional IRA with Vanguard. Can I transfer funds to the UTMA from one of these accounts?
UTMAs arent retirement accounts that youc could jist transfer it to. You don't want to pull money out of your IRAs to stick in a UTMA, you'll lose 10%.
They are accounts for kids that you can invest in stocks from. They are opened in the kids name, but managed by the guardian and tied to the guardians account. However, it's is the kids money and has to be turned over to them at 21. But it can grow tax free as long as the child's income is less than 1250 a year.
There is no minimum for them though.
This post was edited on 6/22/24 at 10:26 pm
Posted on 6/23/24 at 12:56 pm to lsugrad35
are you saving for college? check out LA Start 529 for education. Now has ability to convert it to a Roth if they don't use it for college. You get a match on your contributions and they get a state tax credit for your contributions as well if you are in Louisiana. Vanguard fund options only and no account fee.
Posted on 6/23/24 at 1:23 pm to TheBoo
My wife and I ruled out the custodial account as well. While I think we are solid parents and will raise two well minded children, I didn’t want to have to give them full control of any decent chunk of money at 21. Our plan has been max out their 529s for the full state tax credit and then put additional money in a brokerage account and gift whatever we feel is appropriate when they graduate college from that account.
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