Helping kid invest $
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Anonymous
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My son received a few thousand for his bar mitzvah, and our house rule is that 50% goes into their 529 and they can keep the other 50% in their savings account. My son asked if we could put the 50% that's supposed to go into savings in the stock market instead (we've discussed the S&P 500, so that's what he wants to invest in). I guess his class project in 5th grade with the stock market really made an impression on him, because he's still talking about it!
Are there any options other than the UTMA/UGMA accounts at Vanguard? That's where we already have our Roth IRAs (including for our older kids) so that's my default place to go. I'm just wondering, with all of the restrictions on the UTMA/UGMA, is there a better option? I called but they didn't seem to indicate there was. However, I know they sometimes get it wrong. TIA! |
Anonymous
| Does he have any earned income from a job? |
Anonymous
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OP here. No earned income. Otherwise I would have opened a Roth IRA for him.
That's the issue; he just has birthday money that he wants me to invest on his behalf. Is there an alternative to the UTMA/UGMA accounts? If they are separate (I haven't looked into it enough to know for sure), which should I choose? |
Anonymous
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Do not open yet another account, give out his DOB or SS number.
Buy stocks in a regular investment account under your own name and done. Few thousand is not a lot of money. It's for learning as you say. When DC turns 18, sell the long term stocks bit by bit and give him back his money. Or keep all and just give him cash from your income minus taxes if you wish. |
Anonymous
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Yeah the alternative is to open an account in your name for now and then give him the stocks (or a cash equivalent) when he is 18.
That would actually be easier but maybe not quite as attr |
Anonymous
| Our kids invest through greenlight. Fantastic app for investing savings allowance etc geared towards families. |
Anonymous
| What is your concern re UTMA/UGMA? That’s what we have and it’s been working fine. |
Anonymous
+1, our kids should have at least 100k+ by the time it is turned over to them. |
Anonymous
| VTI 50% + VXUS 50%. Set and forget. |
Anonymous
We also do this and love it. I think I've heard that Fidelity has a teen account, but I don't know the details. |
Anonymous
Concerns include that you're turning over money to the young adult unrestricted and that they count as the kids assets when financial aid is determined. |
Anonymous
Why would you choose a route that costs you taxes? |
Anonymous
The money will count against you for financial aid either way unless you put it in a grandparent's name or soemthing. |
Anonymous
+2 A grandparent opened a small UGTM account for our kids; when they aged into it, they were able to sell the whole thing with zero capital gains because they didn't have enough earned income of their own at the time. Kid 1 sold it all and then reinvested the max he could into his Roth, repurchasing some of the same stock but with a higher tax basis. Obviously, this would be different if your kid was earning a lot at 18 or 21. |
Anonymous
Parental assets are assessed at a lower rate than student assets. |