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Message
Misc Savings for Kids
Posted on 10/1/23 at 7:31 am
Posted on 10/1/23 at 7:31 am
Cliff Notes:
I have two young kids one is five one is a newborn. I want to have an account for each just for future life expenses. This will be separate from a 529 (which we are already funding) for things such as weddings, vehicles, etc. I don’t necessarily want the account to be in the kids names just a separate account where I stash away Funds for these types of things.
I know the simple answer is a high yield savings account for each but I don’t foresee interest rates remaining this high on these accounts long-term, so I was thinking to just open a brokerage account for each kid and auto invest into an S&P 500 fund, such as VTSAX. I’m OK with moderate risk as I have several years before I will ever need this money. Is there another option I’m overlooking from a tax perspective I know I will have to pay capital gains when we start using this money in the future.
Thanks in advance for any responses
I have two young kids one is five one is a newborn. I want to have an account for each just for future life expenses. This will be separate from a 529 (which we are already funding) for things such as weddings, vehicles, etc. I don’t necessarily want the account to be in the kids names just a separate account where I stash away Funds for these types of things.
I know the simple answer is a high yield savings account for each but I don’t foresee interest rates remaining this high on these accounts long-term, so I was thinking to just open a brokerage account for each kid and auto invest into an S&P 500 fund, such as VTSAX. I’m OK with moderate risk as I have several years before I will ever need this money. Is there another option I’m overlooking from a tax perspective I know I will have to pay capital gains when we start using this money in the future.
Thanks in advance for any responses
2
Posted on 10/1/23 at 9:16 am to Jblac15
Custodial brokerage account. I know you don’t want it in their names, but why pay taxes based on your income. Just don’t tell them about it.
Posted on 10/2/23 at 10:44 am to Dandaman
quote:
Custodial brokerage account.
This is what we did. It transfers to them at 18, but the interest income gained is taxed at their income rate.
And OP, while it is true the interest on those high yield savings accounts won't continue; there is nothing to say you can't take advantage of them now by dumping the money there. And when the rates inevitably drop, you can then dump into some sort of investment/brokerage account.
Posted on 10/2/23 at 3:13 pm to Jblac15
quote:
529 (which we are already funding) for things such as weddings, vehicles, etc.
You know a 529 really can’t be use for many of these things. Especially a wedding. Now 529 aren’t bad but make sure of what you were using it for and can show educational expenses for it. Or use an UGMA/UTMA. But look in to those! There are some tax advantages on thresholds of growth. But that may defeat the being in their name. It’s your asset until they turn 18/21.
This post was edited on 10/2/23 at 3:18 pm
Posted on 10/2/23 at 5:41 pm to LSUtiger89
I'd kindly suggest that you re-read OP.
Posted on 10/2/23 at 7:52 pm to tiger91
Thanks for all the feedback. Yes, I’m aware of the purpose and limits of the 529, I think you misinterpreted my sentence.
I will look into the UTMA/UTGA options thru vanguard.
I will look into the UTMA/UTGA options thru vanguard.
Posted on 10/2/23 at 10:10 pm to Jblac15
I didn’t misread anything. The guy I replied to did.
Good luck!
Good luck!
Posted on 10/3/23 at 10:38 am to tiger91
What did i misread exactly in your opinion?
Posted on 10/3/23 at 1:21 pm to Weekend Warrior79
I actually came into a decent amount of money from my grandparents recently, that was given to each of my children. I set up a brokerage account for each that is in my name only, and the money is all in SPAXX for now just earning the high interest. I know timing the market is not the best plan, but figure I'd wait out to see if the expected pull back materializes, then start dumping it into ETFs.
For those who went custodial, what's the benefit? I can gift my stock purchases to each of my kids at any point in the future, wouldn't the tax implications be the same? I will never be wealthy enough to worry about the gift tax exemption amounts, which is the only problem with gifting them their shares all at once 15-20 years from now.
For those who went custodial, what's the benefit? I can gift my stock purchases to each of my kids at any point in the future, wouldn't the tax implications be the same? I will never be wealthy enough to worry about the gift tax exemption amounts, which is the only problem with gifting them their shares all at once 15-20 years from now.
Posted on 10/3/23 at 9:25 pm to LSUtiger89
I’m not intending to use the 529 for anything other than educational expenses
Posted on 10/3/23 at 9:55 pm to Jblac15
Make sure that if you are eligible for a Roth that you fund it for yourself and your wife before doing anything for your kids. The reason is that you can always withdraw your contributions and also conversions that have been in the account for at least five years with no penalty. It gives you more flexibility. Fund all the other accounts for the kids after you have maxed both Roths. At some point, your kids might have earned income and if you can, you should open Roths for them and put as much as you can, up to their earned income, for them. It's the greatest amount of flexibility down the road.
If you've got enough money to do it all, fine, but I would prioritize Roth over the other vehicles.
If you've got enough money to do it all, fine, but I would prioritize Roth over the other vehicles.
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