Kids Savings Account - Investing?

So I have a separate savings account for each of my sons which I contribute a set amount each month.  As it grows in their Ally Savings Account, I often wonder if it would be advantageous to invest some of it in hopes of increasing their wealth for whatever they decide to do after they graduate (they are only 11 & 9 currently).


I'm looking for thoughts/advice of whether it would be worth it to invest some of their savings $$$. 

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  • Sure. Why not? Especially with the way the Kiddie Tax works in the U.S. you can tax gain harvest the investment account to raise the cost basis often with little to no capital gains taxes.

    I opened Vanguard UTMA brokerage accounts for both of my kids. I invest money into VT (Vanguard Total World ETF). At least once a year I'll sell and rebuy tax lots with gains (use Specific Identification) to raise the cost basis. As long as they don't have earned income, the unearned income standard deduction is $1100 on ordinary interest and all capital gains. The next $1100 is taxed at 10% for ordinary income or 0% for LTCG rates. Above that is taxed at the parents marginal rates.

    If the kid has earned income the initial standard deduction gets reduced depending on the amount of earned income.

    So try to keep interest, ordinary divs and short term capital gains under $1100 and the total unearned income under $2200. The amounts go up a little annually with inflation, so pay attention.

    Check with a CPA, but I don't believe you have to file as long as they are under the unearned income standard deduction and do not have any earned income.

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