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Message
Looking for how you all save for your kids (529 vs brokerage vs custodial)
Posted on 1/27/26 at 10:16 am
Posted on 1/27/26 at 10:16 am
I’m trying to figure out the structure for saving for them. Not just college...but for things like weddings, first car, down payment, emergencies, whatever life brings.
Are there scenarios where you would not contribute to a 529 at all? Curious where folks draw the line.
Context: 2 kids under 5.Only debt are the mortgages (1 is a rental). Maxing 401ks.
My current thinking (tell me if I’m off base):
1) 529
Concern: What if they don’t go to college or don’t need all of it? I know there are options (trade school, grad school, K–12, reassignment to another kid/relative, and the newer Roth rollover path with limits), but it still feels less flexible.
Short-term perk seems to be tax advantages.
2) Brokerage in their name
I really don’t want them to have full control at 18/21. I’d rather be able to direct funds as we see fit. Not sure I will even consider this option.
3) Keep building our own brokerages and gift as needed
Total flexibility and control. Use it for college or anything else, whenever it makes most sense. Or use the cash to acquire other assets (Real estate etc that they can eventually inherit.)
Con: no tax-free growth like a 529, and there’s the annual gift-tax exclusion to think about.
What I’m trying to decide:
Do you do a “balanced” approach (modest 529 + bulk in our brokerage)?
Or do you go big on 529 and trust that between reassignment/rollover/options, it’ll be fine?
Or skip 529 entirely and stay flexible?
Are there scenarios where you would not contribute to a 529 at all? Curious where folks draw the line.
Context: 2 kids under 5.Only debt are the mortgages (1 is a rental). Maxing 401ks.
My current thinking (tell me if I’m off base):
1) 529
Concern: What if they don’t go to college or don’t need all of it? I know there are options (trade school, grad school, K–12, reassignment to another kid/relative, and the newer Roth rollover path with limits), but it still feels less flexible.
Short-term perk seems to be tax advantages.
2) Brokerage in their name
I really don’t want them to have full control at 18/21. I’d rather be able to direct funds as we see fit. Not sure I will even consider this option.
3) Keep building our own brokerages and gift as needed
Total flexibility and control. Use it for college or anything else, whenever it makes most sense. Or use the cash to acquire other assets (Real estate etc that they can eventually inherit.)
Con: no tax-free growth like a 529, and there’s the annual gift-tax exclusion to think about.
What I’m trying to decide:
Do you do a “balanced” approach (modest 529 + bulk in our brokerage)?
Or do you go big on 529 and trust that between reassignment/rollover/options, it’ll be fine?
Or skip 529 entirely and stay flexible?
This post was edited on 1/27/26 at 10:20 am
19
Posted on 1/27/26 at 10:35 am to Lazy But Talented
Every state is a bit different. But, we opted to do the UTMA route here in Florida. It allows us to contribute and select how it’s invested. We then act as a custodian to withdraw funds as needed as long as it’s for the child’s benefit. It’s pretty open ended; meaning it can be used for paying tuition, purchasing a car for your child, etc.
Here in Florida, the money transfers solely to the ownership of your child at the age of 25 or earlier if you choose. In the meantime, you may be responsible for any capital gains taxes if you take profits. After the transfer; they are on the hook for capital gains.
We invested starting several years ago in a 90/10% mix of VTI and MO using Fidelity. It’s worked out; my daughter is 18 now and about to head to college. She has enough to pay for undergraduate and likely grad school if she chooses to. Our total investment was about $50K over the years and with some luck she’ll have upwards of $200K coming her way at age 25. A hell of a lot better start than I got.
Here in Florida, the money transfers solely to the ownership of your child at the age of 25 or earlier if you choose. In the meantime, you may be responsible for any capital gains taxes if you take profits. After the transfer; they are on the hook for capital gains.
We invested starting several years ago in a 90/10% mix of VTI and MO using Fidelity. It’s worked out; my daughter is 18 now and about to head to college. She has enough to pay for undergraduate and likely grad school if she chooses to. Our total investment was about $50K over the years and with some luck she’ll have upwards of $200K coming her way at age 25. A hell of a lot better start than I got.
Posted on 1/27/26 at 10:52 am to wiltznucs
UTMAs are great if your kid doesn’t turn out to be a shite head
Posted on 1/27/26 at 10:56 am to Lazy But Talented
I have a 529 goal amount in mind for when my children turns 18. I DCA monthly and have an assumed average ROR in mind. If I execute the plan, I should reach the goal.
I can also dial back the contributions if I believe I am running ahead of schedule (i.e. if returns are averaging better than I am projecting over the next 10+ years)
Not too concerned about over funding it because I can rollover $35k into a Roth for them and if there are any additional unused funds I’ll just change the beneficiary to a grandchild one day.
That being said I don’t think I will overfund it and any additional money goes into my brokerage account. Ain’t no way on God’s green Earth am I handing over my hard earned money to my child to control and do as they please at 18/22.
Will use this account to assist when things come up (vehicle, weddings, etc)
I can also dial back the contributions if I believe I am running ahead of schedule (i.e. if returns are averaging better than I am projecting over the next 10+ years)
Not too concerned about over funding it because I can rollover $35k into a Roth for them and if there are any additional unused funds I’ll just change the beneficiary to a grandchild one day.
That being said I don’t think I will overfund it and any additional money goes into my brokerage account. Ain’t no way on God’s green Earth am I handing over my hard earned money to my child to control and do as they please at 18/22.
Will use this account to assist when things come up (vehicle, weddings, etc)
Posted on 1/27/26 at 11:07 am to jsk020
quote:
UTMAs are great if your kid doesn’t turn out to be a shite head
As a parent all I can do is give them a better shot than I had. If they blow it; it’s on them not me. Definitely not without some risks.
Posted on 1/27/26 at 11:41 am to Lazy But Talented
FWIW we did a 529 in NC via Alliance Bernstein and it worked very well. A superb rate of return, and flexibility for employment (tuition, books/supplies, rent, etc.). No issues withdrawing funds as needed.
Posted on 1/27/26 at 11:59 am to Lazy But Talented
1. My first priority was funding 529's for my 3 kids. My wife and I both graduated college with no debt and I want to provide that for my kids as well. I may have slightly overfunded them but there are plenty of avenues to get the money out without penalties or to roll it over to a future grandkid. I have already illustrated for my oldest (HS Sr this year) the power of the Roth if she stays on track and is able to graduate timely with funds left in the 529.
2. Second priority is a brokerage account but I do not directly fund it. I have encouraged my kids to invest at least half of their birthday, Xmas, other money. It is interesting to see their personalities come out as my oldest sticks to the 50% I recommended, my middle goes 100%, and my youngest tries to not put any in the account. I said I indirectly fund it because I am the source of most of the cash gifts but I want them making the decision to invest it. If they want to squander it when they have access, I am comfortable with that as they have elected to put their money in it.
3. With my oldest, I have her funding a Roth IRA. She has had some part-time jobs and I have told her whatever she puts in a Roth I will match dollar for dollar. At 17 she has over $1,000 in the Roth which should put her ahead on retirement if she keeps that up.
2. Second priority is a brokerage account but I do not directly fund it. I have encouraged my kids to invest at least half of their birthday, Xmas, other money. It is interesting to see their personalities come out as my oldest sticks to the 50% I recommended, my middle goes 100%, and my youngest tries to not put any in the account. I said I indirectly fund it because I am the source of most of the cash gifts but I want them making the decision to invest it. If they want to squander it when they have access, I am comfortable with that as they have elected to put their money in it.
3. With my oldest, I have her funding a Roth IRA. She has had some part-time jobs and I have told her whatever she puts in a Roth I will match dollar for dollar. At 17 she has over $1,000 in the Roth which should put her ahead on retirement if she keeps that up.
Posted on 1/27/26 at 12:00 pm to Lazy But Talented
1) 529: We funded them early but stopped. Only have maybe $40k each so most will be rolled to Roth if they dont use it. Excess.can be redesignated for other children or future grandchildren. Worst case I could always spend it on foreign cooking classes or some other fun "academic" pursuit of my own.
2) Brokerage in their name: Got them started at 13 w own brokerages. Put their $ in to manage and teach them to buy indexes not try to pick winners/losers. Plan to use some or all of this for them to pay a portion of their own car as a graduation gift so they have "skin in the game" but have something nice, safe and reliable to take to college.
Disadvantage: counts at higher rate against FAFSA for financial aid
Disadvantage: child gets full control as young adult
Advantage: Develop financial sense and responsibility
Advantage: Potential tax savings "For 2026, the first $1,350 is tax-exempt, the next $1,350 is taxed at the child's lower rate, and amounts over $2,700 are taxed at the parent’s higher marginal rate"
3) Keep building our own brokerages and gift as needed: This is our PRIMARY method. We will gift to them as needed.
Advantage: Retain full control of our assets/ max flexibility
Advantage: zero LTCG if shares are gifted to low income recipient
You can exceed annual gift limits w no tax just need to report it and it counts against lifetime exclusion which is $13.99 million as individual $27.98 married.
I recently used this to gift appreciated shares to a young family member getting married. He sold the shares immediately and paid zero LTCG. The zero LTCG bracket is fairly generous, something like $130k for a married couple / $65k single before LTCG taxes kick in. Figure that will allow window for tax free gifting of appreciated shares during years they most need it early career or while in college (unless it interferes w FAFSA eligibility). Once they're making more than that they won't NEED my help gifts will just be a nice to have and I'll pay cash or willingly pay tax if I sell assets.
Additional: Fund their Roth IRAs. I plan to do this as soon as mine start working. I will match (or better) their contributions so they build the habit early. If they ever REALLY NEED $ Roth contributions can be withdrawn tax and penalty free. Ideally they keep them untouched to grow tax free.
2) Brokerage in their name: Got them started at 13 w own brokerages. Put their $ in to manage and teach them to buy indexes not try to pick winners/losers. Plan to use some or all of this for them to pay a portion of their own car as a graduation gift so they have "skin in the game" but have something nice, safe and reliable to take to college.
Disadvantage: counts at higher rate against FAFSA for financial aid
Disadvantage: child gets full control as young adult
Advantage: Develop financial sense and responsibility
Advantage: Potential tax savings "For 2026, the first $1,350 is tax-exempt, the next $1,350 is taxed at the child's lower rate, and amounts over $2,700 are taxed at the parent’s higher marginal rate"
3) Keep building our own brokerages and gift as needed: This is our PRIMARY method. We will gift to them as needed.
Advantage: Retain full control of our assets/ max flexibility
Advantage: zero LTCG if shares are gifted to low income recipient
You can exceed annual gift limits w no tax just need to report it and it counts against lifetime exclusion which is $13.99 million as individual $27.98 married.
I recently used this to gift appreciated shares to a young family member getting married. He sold the shares immediately and paid zero LTCG. The zero LTCG bracket is fairly generous, something like $130k for a married couple / $65k single before LTCG taxes kick in. Figure that will allow window for tax free gifting of appreciated shares during years they most need it early career or while in college (unless it interferes w FAFSA eligibility). Once they're making more than that they won't NEED my help gifts will just be a nice to have and I'll pay cash or willingly pay tax if I sell assets.
Additional: Fund their Roth IRAs. I plan to do this as soon as mine start working. I will match (or better) their contributions so they build the habit early. If they ever REALLY NEED $ Roth contributions can be withdrawn tax and penalty free. Ideally they keep them untouched to grow tax free.
Posted on 1/27/26 at 12:24 pm to Lazy But Talented
One graduated college and one currently in college.
1) 529 - funded both kids starting at their birth at PMT and time to equal 4-year state school, incl. tuition, room, board, and misc. Have UNIQUE and LA Start.
If they went private school, that was on them. If child 1 got scholarships, that saved the 529 for child 2, of which happened. If child 2 got scholarships, that created option to Roth or perhaps save 529 funds for future grandchildren. As it turned out, child 2 will drain it and that is good ending, as well.
We aimed to fund it at the target amount and no more. Convert to Roth IRA option came out later so that is a great option for many.
It worked out pretty well for us.
2) For wedding, we put money into VG MF, a couple hundred a month from when daughter was born, and then converted to MM a couple of years before wedding date.
Keep the control is my advice. Had a buddy with a daughter who took custody of nice chunk when she turned adult, and my impression was she was not mature enough for the nice chunk. Gift valve is yours.
1) 529 - funded both kids starting at their birth at PMT and time to equal 4-year state school, incl. tuition, room, board, and misc. Have UNIQUE and LA Start.
If they went private school, that was on them. If child 1 got scholarships, that saved the 529 for child 2, of which happened. If child 2 got scholarships, that created option to Roth or perhaps save 529 funds for future grandchildren. As it turned out, child 2 will drain it and that is good ending, as well.
We aimed to fund it at the target amount and no more. Convert to Roth IRA option came out later so that is a great option for many.
It worked out pretty well for us.
2) For wedding, we put money into VG MF, a couple hundred a month from when daughter was born, and then converted to MM a couple of years before wedding date.
Keep the control is my advice. Had a buddy with a daughter who took custody of nice chunk when she turned adult, and my impression was she was not mature enough for the nice chunk. Gift valve is yours.
This post was edited on 1/27/26 at 12:27 pm
Posted on 1/27/26 at 1:18 pm to Lazy But Talented
I’m in the same boat as you. I have 2 kids 5 and under.
For 529, we put away 10k each year as that’s the max tax break in Alabama.
We do not have brokerage accounts in their name. I did not want to have to give over control of any funds even though I hope they’ll be great kids. I created a separate brokerage in my name from my other funds that I deposit into weekly with the thought that this will be gifted to each of them equally at the appropriate time.
For 529, we put away 10k each year as that’s the max tax break in Alabama.
We do not have brokerage accounts in their name. I did not want to have to give over control of any funds even though I hope they’ll be great kids. I created a separate brokerage in my name from my other funds that I deposit into weekly with the thought that this will be gifted to each of them equally at the appropriate time.
Posted on 1/27/26 at 1:19 pm to Lazy But Talented
We're looking very closely at the 530As coming out later this year. Basically IRAs for kiddos. We're currently funding 529s for our two children but if the advantages are there and if the ability to roll ever comes to fruition it'll be an attractive option.
Posted on 1/27/26 at 1:52 pm to Lazy But Talented
For normal amounts a 529
For large gifting consider a Trust. Cost a little to set up and a tax return is required but distributions can be at the trustees discretion and it can last for an extended period.
For large gifting consider a Trust. Cost a little to set up and a tax return is required but distributions can be at the trustees discretion and it can last for an extended period.
Posted on 1/27/26 at 2:19 pm to Lazy But Talented
We went UTMA route. 529 plan had terrible investment options.
We gift our kids a specific amount at the beginning of every year and this became the easiest option and through a Fidelity UTMA account, unlimited investment options.
There are zero tax benefits for the kids because it's a brokerage account but takes a lot of pressure off the wife and I to set aside post tax dollars. The funds are tied up in their trusts that they can't touch until 25 and can only be used to buy/down payment on a house, buy a business, or pay off student debt - per written trust rules. What I also thought was smart, if my wife and I get in a terrible accident, the kids trusts are the beneficiaries of the policy and not the kids directly. We were somewhat nervous about family getting a hold of our death benefit so there is specific language protecting those funds and its use cases.
Writing this out is depressing but I honestly think paying a financial advisor for a hour or two of their time is worth it. Tie in an estate attorney to make sure all your thoughts and wishes are clearly written out and what you want them to do with the all of the funds. My wife and I have worked hard and sacrificed even more to make sure these little ones don't blow it all in vegas for tik-tok or the gram.
We gift our kids a specific amount at the beginning of every year and this became the easiest option and through a Fidelity UTMA account, unlimited investment options.
There are zero tax benefits for the kids because it's a brokerage account but takes a lot of pressure off the wife and I to set aside post tax dollars. The funds are tied up in their trusts that they can't touch until 25 and can only be used to buy/down payment on a house, buy a business, or pay off student debt - per written trust rules. What I also thought was smart, if my wife and I get in a terrible accident, the kids trusts are the beneficiaries of the policy and not the kids directly. We were somewhat nervous about family getting a hold of our death benefit so there is specific language protecting those funds and its use cases.
Writing this out is depressing but I honestly think paying a financial advisor for a hour or two of their time is worth it. Tie in an estate attorney to make sure all your thoughts and wishes are clearly written out and what you want them to do with the all of the funds. My wife and I have worked hard and sacrificed even more to make sure these little ones don't blow it all in vegas for tik-tok or the gram.
Posted on 1/27/26 at 3:31 pm to Lazy But Talented
529 - I have it and like it for the tax advantages, but mainly I like it as its a dedicated fund to my children's education, and no one can mess with it. If they don't use it I would probably gift it to my grandchildren's education, in which my children would appreciate given the burdens of education costs. This is a long term old money plan but with education at the forefront.
Also, if I died and my wife got lonely and insecure, then rushes to marry a Baw who never went to college, or had to pay his own way through college, the Baw would have a different outlook on the $ if say it was just in a brokerage account. The Baw may love deep sea fishing, and convince your widow to cash out the brokerage to fund his charter fishing business, plus a few other man toys. The 529 protects your child from a Baw ruining his/her future.
Don't do option #2. All they are getting from me is a custodial checking account I am saving like $150 a month to. It will be a nice chunk as a gift at 18, but they choose how to save or blow it, but they have to live with it. Hopefully its a lesson learned early in life before bigger decisions come into play.
Option #3 is great but if your wife divorces you or marries the baw, all bets are off.
Also, if I died and my wife got lonely and insecure, then rushes to marry a Baw who never went to college, or had to pay his own way through college, the Baw would have a different outlook on the $ if say it was just in a brokerage account. The Baw may love deep sea fishing, and convince your widow to cash out the brokerage to fund his charter fishing business, plus a few other man toys. The 529 protects your child from a Baw ruining his/her future.
Don't do option #2. All they are getting from me is a custodial checking account I am saving like $150 a month to. It will be a nice chunk as a gift at 18, but they choose how to save or blow it, but they have to live with it. Hopefully its a lesson learned early in life before bigger decisions come into play.
Option #3 is great but if your wife divorces you or marries the baw, all bets are off.
This post was edited on 1/27/26 at 3:32 pm
Posted on 1/27/26 at 3:34 pm to Mariner
quote:
Don't do option #2. All they are getting from me is a custodial checking account I am saving like $150 a month to
Why? $1800/yr just sitting in checking losing value to inflation? Why not open a brokerage account and invest it?
Posted on 1/27/26 at 3:40 pm to Lazy But Talented
529's for the kids' school.
I have a UTMA for daughter's wedding. Not much, 50 bucks or so a month. Started it with like 3k. In grade school. Hell by that time it might make a deposit for a venue.
I have a UTMA for daughter's wedding. Not much, 50 bucks or so a month. Started it with like 3k. In grade school. Hell by that time it might make a deposit for a venue.
Posted on 1/27/26 at 4:12 pm to TorchtheFlyingTiger
quote:
Why? $1800/yr just sitting in checking losing value to inflation? Why not open a brokerage account and invest it?
That POV I can understand. It's side money so yes you can do that. If you put that in a brokerage account its fine. I am talking about "hey son, I saved my arse off and sacrificed my personal enjoyment to fund your college, here is the money which is meant for your education. Please don't blow it on a Corvette, but I can't control what you do with the money, and all I can do is pray that you make the right choice."
Posted on 1/27/26 at 9:05 pm to Lazy But Talented
I just opened a Fidelity UGMA/UTMA custodial account for my 3 yo granddaughter in my daughter’s name, connected to her account. I don’t have much concern about my gd getting control too early, at 18/21. Her mom will manage that.
One reason I did this is so other family members can contribute to the account if they wish, for bdays, Christmas etc instead of, or in addition to buying more shite that she doesn’t need.
One reason I did this is so other family members can contribute to the account if they wish, for bdays, Christmas etc instead of, or in addition to buying more shite that she doesn’t need.
Posted on 1/28/26 at 8:10 am to TorchtheFlyingTiger
quote:
recently used this to gift appreciated shares to a young family member getting married. He sold the shares immediately and paid zero LTCG.
Was the basis 0?
I thought “gifts” had a 0 basis.
I’m not a CPA.
Posted on 1/28/26 at 11:15 am to Lazy But Talented
Kids won’t need college cuz AI will take all the jobs in 20 years.
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