Kids Savings Accounts
Hi there, looking for suggestions on a couple savings categories. I have one for each kid, but I'm thinking about moving those funds into fidelity instead of my checking account, how do I keep track of each kids balance (I put money in each month and birthday money etc). I don't really want 3 separate investment accounts, would I just create tracking accounts in YNAB for each kid and process a "transfer" when moving money into them?
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Following because I have the same question, but for 1 kid. I am feeling motivated to increase my retirement savings by 'allocating' it to different categories. For instance, I literally created a Roth account that I fund with $20/mo for the sole purpose of funding a huge vacation/family reunion for myself after I retire. (It is a 457 not a Roth IRA). I named it Roth 457 Family Vacay.
So with my kid and with my own retirement visions, I used my pre-YNAB strategy and created multiple investment accounts that correspond to categories. I make payments from the distinct categories and then I just track the accounts.
I'd love to find out about a better way. There is something so motivating about maintaining separate categories and I'm loathe to give that out just because I'm moving money towards investments.
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This is an interesting question!
First off, as you know, your budget is where you decide how much money to send to your kids' investment accounts. It's not a good tool for giving the dollars in those accounts jobs—and probably those dollars don't need specific jobs yet, because they're for "future stuff for my kid/college," right?
If you haven't already, I'd look into UTMA/UGMA or 529 college savings plans for those dollars. Even though maintaining a separate account for each kid is a pain, there can be significant tax and legal reasons for doing so—although of course I'd talk to an accountant or financial advisor before making a decision.
Ivory Storm, I really like the idea of giving your retirement dollars jobs to encourage more savings, and I would consider making a separate budget for that so you're not stuck managing multiple accounts. My wife is a public employee, and I'm a former public employee and also have a side business. In order to maximize our tax-advantaged space we have a ton of different investment accounts, and honestly I can't wait to retire just so we can consolidate some of them.
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Matthew said:
If you haven't already, I'd look into UTMA/UGMA or 529 college savings plans for those dollars. Even though maintaining a separate account for each kid is a pain, there can be significant tax and legal reasons for doing so—although of course I'd talk to an accountant or financial advisor before making a decision.This.
We use UTMA savings accounts at Ally, UTMA brokerage accounts at Vanguard.
We do not keep their accounts in our budget. We send the money we put in them out of the budget.-
nolesrule Interesting, I haven't done a ton of research but the concept of 529 plans needing to be used for college expenses to be qualified concerns me. I don't plan to push college unless necessary and with my luck all three will decide not to go! UTMA seems more realistic, but same concerns, I wouldn't want my future 18 yr old to get a lump of cash when they may not be ready for it. I was thinking of just putting it into a brokerage account but i guess unless i do 3 i wouldn't be able to track balances for each. Thanks for the tips!
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Forest Green Commander yeah, we don't have 529s for the kids, though we did purchase a Prepaid tuition plan. while the money is not invested, we do get a 100% refund of whatever goes unused.
For the UTMA investment accounts, we tax gain harvest every year.
UTMA money can be spent now for the child's benefit as long as it's not for living expenses that the parent/guardian should be responsible for. -
Forest Green Commander I went around and around and there are a few pieces of info about 529 that swayed me. Just sharing for the facts, I definitely don't have any stakes in how someone approaches savings for kids. And like you I am not a college-pushing-parent.
1- 529s are not just for college. Any vocational training or apprenticeship counts -- education expenses, expenses for materials (computers, welding equipment, etc.), and living expenses too.
2- if a child gets scholarships, the amount of the scholarship can be refunded in cash w/o penalty or taxes.2- they are transferrable among siblings, cousins, grandkids, family members. This is what swayed me to at least putting something in there. Not funding a full college tuition mind you but a little balance of some kind. Either my son will use it, or I can pass it along to one of my nieces.
3- with 3 kids I'd anticipate that at least 1 of the three would want continuing education of some kind. You can have one account, put some money in there and then just transfer it to whichever child, for their own reasons, wants support for education after high school.
4- for a brokerage account what I would do is have one account and just see what it does and then divide it evenly when the children are of an age where you want to be giving them funds.
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Ivory Storm
I also had the same problem. Thanks for sharing this information. This will really help me a lot.
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Ivory Storm This is super great info and advice, thanks so much!
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As someone who put 2 kids through private education - one with an UGMA (the 529s were not available when i started saving) and the younger one with a ROTH - I do have some fun pictures of a 3 year old "signing" her 1040 since her UGMA generated income however, having to file and pay taxes for 18 years on that one was a real pain... whereas we used the Roth for my son who did get some academic scholarships - instead of cashing them out (which was tempting) we transferred the leftover balance when he was done to his son who was born 3 weeks before he graduated... we add birthday money to it but overall we have just let it grow on its own and its quite a nice tax free nest egg for the next generation....
