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I posted here before about 529 plans. I've decided that we're not going to go that route. Instead I see that there are some financial institutions offering savings accounts for kids (custodial accounts). Two institutions Capital One 360 (formerly ING) and Wells Fargo both offer these and I have accounts with them. I would probably go with Capital One. They have two options: a straight savings accounts at the current 0.75% APR or an investment account in partnership with Sharebuilder.
The purpose of the account isn't 100% for education. I would like the money to be there for things as they come up and also for something for her to have as her own and use it to teach her about savings. Whatever is there when she turns 18 she can use for college or at the very least maybe to purchase a car. I'm hoping to have at least $30-50K in there by then (in today's dollars). It's not the half million the calculators say we'll need for college, but if my parents gave me that at 18, things would be much different.
Looking for advice regarding each account or possibly opening both? I am a little weary of having an investment account for this, but she has time on her side. She will be born in March and I don't foresee making withdraws from this account for at least 5 years (unless the sky falls down of course).
I added the custodial account to my fidelity portfolio. took two seconds. my big girl is fully invested and had a 28.34% return in 2013. I figure she wont be touching it for 20 years or so, may as well take advantage of the time to let her accumulate big bucks. the plan isn't really to use it for any of her expenses while she is my responsibility. its there for her to maximize her quality of life going forward. oh and I do plan to switch over from adding to that to doing some kind of trust. the problem with the custodial account is that its hers at 18. that's a little earlier than I think she will be ready for it.
I added the custodial account to my fidelity portfolio. took two seconds. my big girl is fully invested and had a 28.34% return in 2013. I figure she wont be touching it for 20 years or so, may as well take advantage of the time to let her accumulate big bucks. the plan isn't really to use it for any of her expenses while she is my responsibility. its there for her to maximize her quality of life going forward. oh and I do plan to switch over from adding to that to doing some kind of trust. the problem with the custodial account is that its hers at 18. that's a little earlier than I think she will be ready for it.
That's my plan also, but who knows what will happen. If I'm employed, there won't be any reason to. Do you also have a separate college savings fund for her? How old is your daughter? Just wondering because yous say she won't need it for 20 years?
That's my plan also, but who knows what will happen. If I'm employed, there won't be any reason to. Do you also have a separate college savings fund for her? How old is your daughter? Just wondering because yous say she won't need it for 20 years?
she just turned 4. so i figure she doesn't need money until she finishes grad school. I don't have a separate college fund. ill just pay for it from my savings when it comes. I believe I looked into a 529 type thing but decided against it. im not a fan of locking up my money in special accounts even if there is a little tax benefit.
she just turned 4. so i figure she doesn't need money until she finishes grad school. I don't have a separate college fund. ill just pay for it from my savings when it comes. I believe I looked into a 529 type thing but decided against it. im not a fan of locking up my money in special accounts even if there is a little tax benefit.
OK, yes makes sense, my line of thinking is the same.
is there much of a difference of having a custodial account that turn over to your childs actual account at 18 vs keeping the money in your own name/account and then giving/transfer/open an account when the time is right? i have a baby coming in 8 weeks and i don't really like the idea of a 529 locking up money for a specific spend. is there some tax implications i am unaware of that you can't start a new account with a 50-100k sum of money in your childs name?
is there much of a difference of having a custodial account that turn over to your childs actual account at 18 vs keeping the money in your own name/account and then giving/transfer/open an account when the time is right? i have a baby coming in 8 weeks and i don't really like the idea of a 529 locking up money for a specific spend. is there some tax implications i am unaware of that you can't start a new account with a 50-100k sum of money in your childs name?
This is a good question, maybe someone who knows can answer. My reasoning for keeping the account in her name is for when she gets older it will be something of hers. I think this will be important in teaching her about finances. I think if the account is in my name, there will be a disconnect - always easier to spend other people's money than your own lol.
I had a question among similar lines. I contribute post tax monies into a custodial account, I understand that gains are taxable, but what about contributions. Also, who pays the taxes if the child is under 18 and wants to make a small withdrawal?
is there much of a difference of having a custodial account that turn over to your childs actual account at 18 vs keeping the money in your own name/account and then giving/transfer/open an account when the time is right? i have a baby coming in 8 weeks and i don't really like the idea of a 529 locking up money for a specific spend. is there some tax implications i am unaware of that you can't start a new account with a 50-100k sum of money in your childs name?
I transfer money into that account to avoid estate taxes or gift taxes later on. I use this as a means of transferring wealth to my children, if someone isn't going to be passing a lot of money then im not sure it serves a real financial benefit. it could just help them mentally set aside money for a specific purpose so they don't touch that money for anything else. it could also be a way of handing over a nice gift to their kids in one large chunk that they developed over the time of the child's childhood. so maybe you are covering their college or maybe their first house or something. for me, I want to set up my children so that they can make decisions in life without worrying about money right from the beginning. they can take a job they enjoy rather than one they need to earn more or they can choose not to work a job.
I'm don't consider a savings account earning 0.25% as a viable alternative to a 529 plan that is typically invested into equity funds. If you aren't interested in realizing tax savings at the expense of having to spend the funds on education, then you should be looking at a taxable mutual fund account as the alternative.
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