Parents Confused Investing for Their Kids
Parents are overwhelmed and seeking guidance on managing and investing funds for their children's future, ranging from small earnings to lottery winnings and anticipating future income. They are struggling with choices like UTMA, IUL, 529 plans, and general investment strategies, often feeling lost and unsure of the best approach. This highlights a lack of accessible, personalized financial advice for families.
SOURCES (60)
“Hi, I am getting ready to pay for my son's college. I started 529 plan very late, and I only have $10K in it. The college costs are $40K/year. I have this money (and more, through some inheritance) that are in a brokerage account. I…”
“We have a high school senior who will go to college next year. We plan to use an investment account for part of it. It was 95K, all in VTSAX and I moved 1/4 of it to HYSA a couple weeks ago. That would be for freshmen year. (We also have a 529.) My question is should I change all of the rest into bond fund now or over next 3 years? is there something else we should do with it? Thanks! submitted by /u/Boo_Care4278 [link] [comments]”
“Can I do the following: 1. Set up a (revocable? irrevocable?) trust. 2. Trust opens a 529 account with itself as owner and me as beneficiary. 3. I contribute $520k (NY limit). No gift tax because it's to myself as beneficiary. 4. (After I die?) Trust changes beneficiary from me to my child. 5. Child withdraws money: - $520k (representing contributions) is income tax-free. - No gift tax per your theory that it is owed by owner, and trusts don't pay gift tax - No estate tax because it'”
“I have 3 nieces who are of the 5,5, and 11 years old. When their birthdays come around instead of buying a gift I would like to invest in something for them. What would be the best way to contribute towards their future? Any input is much appreciated. Thank you submitted by /u/Winter_Ad6231 [link] [comments]”
“Background- our family is very middle class, my wife is a teacher and I’m a technician(I get paid to hard start expensive machinery). Our kids go to public school in a decent neighborhood. My parents recently gifted my children $500k after selling property. A couple years ago (because of another monetary gift) we front loaded our kids 529. They also have a life insurance policy, all 4 of us do. So now what? We have been advised to start an UTMA account…why should we or shouldn’t we? Someone also”
“I am assuming one of your parents is the owner of the account and you are the student. You would then open an IRA and transfer the max into it each year until the 529 is empty. You must have W2 income at least equal to what you are rolling each year.”
“Hi all- my wife has about $50k in student loans and recently her parents have offered to give her about $30k as a gift to pay off some of her student loans. They were hoping to give us a cash gift to deposit and pay off the loans. As far as I can tell the cash gift limit is $19k per individual, and depositing greater than $10k will trigger CTR form. We certainly are not doing anything insidious and none of us know the best way to go about doing this. Does anyone have any advice on how to accompl”
“Without divulging too much personal information, I recently have been given a roughly $4000/month stipend for life. I earn roughly 130-140k per year outside of the stipend, and have a pension and annuity in my name for retirement. I have some debts that will be taken care of prior to investing for my children but I’m looking for advice. I’ve spent my life working manual labor jobs, breaking my body for a paycheck, and while I’m thankful and grateful for the work that provides for my family, I wa”
“If they are 13+ they can get their own “youth account” which is still monitored by you. Another option is a custodial Roth IRA; get those tax savings”
“The age and where the money came from really matters here, but a Roth IRA at Vanguard is a great place to start.”
You can open up a Vanguard account and put it on VTI or VTSAX
“Savings account with ally.com or something similar . How old is this child?”
“She works some weekends and said she wants to put all her money into an investment account so she can reflect back and say she is glad she did. Whats an account you suggest we do to kick start her wealth? submitted by /u/jku2017 [link] [comments]”
“My son is 11. His DTC is approved till he’s 18. I opened a RDSP account for him few years ago at Scotia. It’s super hard to get ahold of anyone via phone at Scotia and branches don’t have access. I haven’t been able to make contributions in the past couple years. I’ve read that TD has a self directed investing option. I have some funds in a GIC maturing in late 2027 and rest cash and mutual funds. I want to make the max contribution for this year and move it to TD once the government deposit com”
“I have 2 kids. 4 yo and 1 yo. I opened scholarshare 529 in CA 4 years back and actively funding it. I just realized that it shows my name as beneficiary. May be I did mistake in adding my 4 yo as beneficiary. What should I do next if I want to save for both kids? Option 1 - Change beneficiary on existing account to 4yo And open new account for 1 yo? Option 2 - keep funding the existing account and change beneficiary in future when its clear which one or if both kids needs support ? Can we have b”
“I would like to save money for my kids' college studies and I need a fund they can use to go to university either in the US or in the EU. I've looked at 529 plans, but the international universities on the Dept of Education's list are private schools. For example, the Free University and Humboldt University are not eligible. My kids have dual US - German citizenship, so I'd like them to be able to use the funds for living expenses if they study in Germany. I also want then to be”
“From what my research has been telling me, yes. My kid does generate expense, however it's typically negligible. I suppose I can throw $100-150/mo to be safe since she's 11 now.”
“Depends on where you live and of that state has a tax credit and how advantageous that is for you. If there is no credit or you don’t care about it, Utah is a solid plan Morningstar does an annual review of plans.”
“No tax issues as you need to fund 529 with post tax dollars. However, there may be a tax benefit to fund progressively over time, for example $10K over 5 years, rather than $50K in one up front funding action in year 1, as many states allow a state income tax deduction, but only up to a certain limit each year”
“What do you want the purpose of your gift money to be? I already gave you the consideration of a 529. What opposition do you have on that?”
“Experiences is probably the route I’ll take in the future when he’s a bit older and actually knows what’s going on a bit more lol”
“We did UTMAs bc We dont want their money going to someone else and maybe they want to start a business or buy a house instead of go to college. Its their money to decide what is best for them.”
“My 5 year old was born in 2020. All that's gone into his 529 is his annual child tax credit, and his two Covid payouts (I think $1400 total), and I think 2 or 3 $500 gifts from his grandmother. His account has a balance of $28,600 as of today. It's not a crazy amount of money but it's more than the net worth of many 20-somethings because he obviously doesn't have any debt or life expenses. We're definitely not rich, but are solidly middle-class enough that we don't depend”
“Open an account and save a full year of daycare expenses. Then when the daycare bills come, they can auto pay out of that account. You will also have a year of practice removing that from your monthly budget.”
“This and you do want to open the 529 in your state if they offer a tax deduction. You can always shift the money to another plan after you've claimed the deduction.”
“That depends. I’ve known several people making big money and having children late in life. They often retire before their kids begin college. So when the kids are entering college, their income is greatly reduced.”
“How much of a lump sum and are you Richie Rich? If it is more than the annual gift tax exclusion limit it will have to be reported on your taxes and the amount will be deducted from the lifetime limit.”
“Find out your state contribution limit to get a state tax deduction. In Virginia you can open unlimited accounts (for a single kid) and fund each account to the max to get the state tax deduction for all contributions. Yes this is dumb.”
“Not really, in SC. If you are the owner, with child as beneficiary, there is no gift implications. Some people establish children as both the owner and beneficiary. This is suboptimal from a fafsa perspective, and gifts over the yearly limit would have to come out of your lifetime max (estate limit, file a form, no tax). Another comment mentioned having a grandparent be the owner of the account, which does avoid any fafsa inclusion, but if you contribute, gift tax rules apply.”
“Not knowing your income, etc., my understanding is that 529 money, where the parent is the custodian, is counted as an asset for FAFSA purposes. If you expect to have income where the child might be eligible unfortunately aid, maybe make someone else (grandparent) the custodian.”
“The other, non-tax issue is that 50k at age 2 may be over-funding the 529. Unless you plan to later split the account between multiple beneficiaries AND fund multiple Roth conversions, this is likely to be a $500k 529.”
“Some states allow a tax deduction on contributions, although there may be an annual cap on deductibility. Suppose there's a $5000 cap on deductibility, and you contribute $50000 in 2026 in a state that allows the deduction, you only get to deduct $5000. But if you hold back and contribute $40000 in 2026, $5000 in 2027, and $5000 in 2028 ... you'll get $15,000 in state income tax deductions. Every state is different. NY has a cap. SC has no cap on deductibility of contributions to South C”
“ask AI. Generally the state allows you to tax deduct up to a certain amount from your income taxes every year for the 529 investment (e.g. $5k max deduction for 529 per year) BUT they allow you to roll forward any balance to future years. E.g. you put $100k into the 529 this year then you can deduct $5k from income for next 20 years. Paperwork wise this is a bit annoying (literally just need to keep track). I think the price/overhead is worth it since the money is growing tax free so you can ima”
“You miss on potential tax benefits $6k a year per child I believe deduction. But then the money has longer to grow.”
“My plan is to open a 529 college savings account and fund it with 50k. My kid is 2. I'm in SC. Are there any tax issues with funding it one time lump sum vs over several years? Thanks! submitted by /u/Prof_Fuzzy_Wuzzy [link] [comments]”
“Your kids' spouses will have no problem spending your wealth. Some folks like that idea, others think spending more themselves while they are still alive is a better use of the funds.”
“Fairly new to this: My 20 and 23 yo kids inherited $: I'm budgeting in HYSA (or firm MM) and CD ladders for next few years of college tuitions and living + emergency buffer. Leftover monies to invest: Kid 1 has 180 k; Kid 2 has 50k: for a Roth (up to their W2 each year) and a taxable brokerage each. After they're 25 yo, and/or independently earning, they'll take over these accounts. % allocation of which few funds per Roth and taxable acct? I'm thinking core SCHG or VUG in Roth f”
“Have you contacted the school involved? Many institutions will have accounts in both countries and the school may well have a way to facilitate payments from the US.”
“Another possibility is opening a 529 plan. You would have to check to see if your daughter's college is an eligible foreign institution though. Schwab has an article about it which includes links to check on the school's eligibility. https://www.schwab.com/learn/story/how-to-use-your-529-funds-to-study-abroad”
“Thanks!!. I see a couple of recommendations towards opening my own account in Canada. Haven't considered that before - but it's something I will explore. So far the plan has been to use my daughter's Canadian account, which would generate the need to file Form 709 as discussed in this thread.”
“For US gift tax purposes, you can avoid any exposure by sending the money directly to a qualified educational institution for tuition and fees. Sending to the student could trigger a filing requirement if you send over the annual exclusion (19k in 25/26) even if it is to cover tuition. Only way to avoid this is to send directly to the institution.”
“Keeping in mind, the value of all gifts are included in that reporting limit, Christmas, birthdays etc...”
“The income that your 11 year old receives would not be included in your taxes, if it comes in their name and their Social Security number”
“Meh; utma accounts are a pain. Can set up a 529 plan sure. For me it’s not a big deal just to wait a few months for the rest.”
“I am going to start school for an engineering degree that should take me about three years (I had been in school prior but never completed the degree). I have just under 100k all in a SWSTX account and I know I will be pulling from it to help pay for living expenses while in school, but mostly just tuition. I am wondering whether it would be wise to just keep as much as I can within the index while in school, or if it would be more advisable to take out what I need now (about 50k) to hold me ove”
“I withdraw as we go. I save all receipts along the way for the small things. And then when we pay tuition each semester I add those to the withdrawal. So I’m withdrawing probably 3 times a year if you include summer semester. I pay all expenses through our personal account and then get reimbursed from the 529. If that makes sense.”
“Every school should be required to accept payments direct from 529 accounts to simplify”
“I am married. I do not have enough job history to be on the application for a mortgage, but my husband does. What I bring to the table is my 529 account so that’s what we’re using for our substantial down payment and my mortgage processor and underwriters can not wrap their heads around this. I am not on the loan, but I will be on the deed and we are married. The 529 funds were deposited into our joint bank account. The processor is trying to force me into signing a document that states that I a”
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“Teaching kids that work earns money is an important first lesson, but many people stop here and never experience their money making money for them. Once it clicks that for kids that investments can be a big part of their income they will be far better off financially in the long run.”
“Unless I’m missing something, I don’t understand why anyone would use this? The parents pay the returns? So they aren’t actually investing, just moving money between accounts ? What happens when the child puts in $100 and stock jumps %50? The parent now owes the child more money? Why would I not just setup a real brokerage accounts and manage it for my child ?”
“The rental property idea is great for teaching business management, but don't overlook the simplicity of a custodial account. If you gift the $38,000 annually to a UTMA/UGMA custodial brokerage account and invest it in broad-market index funds, the compounding returns over a 15–20 year horizon will be massive without any of the active management headaches. If you still want them to have real estate exposure in that portfolio, you can even buy fractional shares of rental homes through Arrived”
“We live in a country where you get a monthly support per children unless you make a ridiculous amount of money. Early on during the pregnancy of our first, we decided that we would save all of it for their future unless we were on a serious financial crisis. For normal emergencies we both have emergency funds (small ish ones, but still). At the moment, we were transferring each month the funds into stocks and shares for our oldest. My question is: now that we have two, is it better to transfer t”
“Don't you think you have enough assets to give your kids a really good start (and more) in life should something happen to you? Your assets will grow exponentially and by the time they're 20 they probably won't even need to ever work (not that I recommend that).”
“life insurance is useless 75k per kid for college funding is way too small - aim for 200k in today's dollars each, that will cover most expenses for an average college (these colleges are stupidly expensive). Room and board alone is about 15k/year. Don't saddle your kids with college debt, it's not a great way to start in life. healthcare: if you can get VA that should be helpful. I'm using a healthshare that greatly limits my costs (800/mo for 5). Might not work for everyone but”