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What would you do with your kid’s savings account?
Posted on 5/3/24 at 6:10 am
Posted on 5/3/24 at 6:10 am
I want to get my kids money into something that going to grow more than a savings account. We have 2 kids: 1 is starting HS with about 15k in savings and the other is starting middle school with about 10k in savings. We didn’t go the 529 route because we were worried about them not going to college because they are both boys and potentially getting into a trade. However, this year I believe you can now roll over that 529 into a Roth IRA but the account has to be at least 15 years old, so that may not be an option. I’m thinking about opening a Roth IRA for both of them and dumping their money there to let it ride. They could still pull out money up to what we put in or for qualified educational expenses should they choose the college route. My problem is I make to much money to contribute without them having some sort of an income.
What would you do or is there another option that I’m not thinking about? Is an UTMA account an option? I don’t know much about them. Can you roll them over to a Roth account once they are over 18?
What would you do or is there another option that I’m not thinking about? Is an UTMA account an option? I don’t know much about them. Can you roll them over to a Roth account once they are over 18?
This post was edited on 5/3/24 at 6:58 am
11
Posted on 5/3/24 at 6:20 am to Bourre
Will they need it anytime in the near future? Have you thought about starting them off by helping with a downpayment for a house or an emergency fund?
This post was edited on 5/3/24 at 6:21 am
Posted on 5/3/24 at 6:26 am to Bourre
Posted on 5/3/24 at 6:26 am to Bourre
(no message)
This post was edited on 5/3/24 at 6:32 am
Posted on 5/3/24 at 7:03 am to NATidefan
quote:
Will they need it anytime in the near future?
No, they shouldn’t need it in the near future. Hopefully
Posted on 5/3/24 at 7:35 am to Bourre
I think UTMA is definitely an option.
Here is what fidelity says.
Here is what fidelity says.
quote:
Custodial accounts established under the Uniform Transfers to Minors Act (UTMA) are taxable brokerage accounts belonging to one minor. Any deposit or transfer into a Custodial account is considered an irrevocable gift to the minor owner. By contrast, Roth IRA for Minors accounts have certain tax advantages, and contributions must be made in cash. Transfers of securities into Roth IRAs from non-retirement accounts is prohibited.
Transfers of cash directly from a Custodial account to a Roth IRA for Minors is permitted if certain criteria are met:
The same minor is the owner of both the Custodial account and the Roth IRA
The minor has not reached the age of majority
The transfer is of cash, not securities
The minor is eligible to make a Roth IRA contribution for the tax year in which the transfer is made
Please note that IRA contribution limits apply.
We strongly recommend consulting with a qualified tax professional in your state regarding your specific situation.
Posted on 5/3/24 at 7:38 am to Bourre
You could always make them get a job. 
Posted on 5/3/24 at 7:41 am to Bourre
They need earned income to contribute to a Roth IRA. Your income isnt a factor.
If you are suggesting opening in Roth in your name instead, you could backdoor Roth (unless you have traditional IRA in which case pro rata rule and taxes would apply.) You should do this for yourself not as their Roth though.
I'd still consider 529. It can be used for college or trade school and other education expenses and worst case change beneficiaries, rollover to Roth IRA in 15 yrs (whole point is long term growth anyway so why does it matter when?), or take the penalty.
Otherwise, just use a UGMA or UTMA Fidelity Learning Center UTMA UGMA
First $1250 earnings are federal tax free and next $1250 is taxed at child's rate. It would be least restrictive to spend as needed and they could even use to fund their Roth IRAs later while in low tax bracket (perhaps even paying zero LTCG). You could even seed the account with appreciated shares from your own taxable accounts assuming if they sell as young adults they will be in lower tax bracket than you are now.
If you are suggesting opening in Roth in your name instead, you could backdoor Roth (unless you have traditional IRA in which case pro rata rule and taxes would apply.) You should do this for yourself not as their Roth though.
I'd still consider 529. It can be used for college or trade school and other education expenses and worst case change beneficiaries, rollover to Roth IRA in 15 yrs (whole point is long term growth anyway so why does it matter when?), or take the penalty.
Otherwise, just use a UGMA or UTMA Fidelity Learning Center UTMA UGMA
First $1250 earnings are federal tax free and next $1250 is taxed at child's rate. It would be least restrictive to spend as needed and they could even use to fund their Roth IRAs later while in low tax bracket (perhaps even paying zero LTCG). You could even seed the account with appreciated shares from your own taxable accounts assuming if they sell as young adults they will be in lower tax bracket than you are now.
This post was edited on 5/3/24 at 8:31 am
Posted on 5/3/24 at 7:55 am to Bourre
Series I Savings Bonds can be put in kids names. I would have there over a bank account.
Posted on 5/3/24 at 8:29 am to lsu13lsu
Why I bond? As an inflation hedge for a teen and pre teen? Good
HYSA currently yields more than I bond without 12 month lock in and even after that you lose a quarter of interest if cashed out before 5 years.
HYSA currently yields more than I bond without 12 month lock in and even after that you lose a quarter of interest if cashed out before 5 years.
Posted on 5/3/24 at 8:39 am to TorchtheFlyingTiger
I have not found any Children's HYSA that yield higher than an I Bond. Cap one Childrens accounts are 2.5% right now.
At one point my kids were earning 8-9% on I Bonds.
At one point my kids were earning 8-9% on I Bonds.
This post was edited on 5/3/24 at 8:40 am
Posted on 5/3/24 at 9:08 am to lsu13lsu
quote:
At one point my kids were earning 8-9% on I Bonds.
I had some money sat aside for my kids doing this as well, but that time has come and gone.
I now have it in UTMA for one kid still under 18.
You could put it in there and earn around 5% on a money market account alone, put in USFR and earn about 5.35 currently, or buy short term T-bills or CDs with it and earn over 5%.
This post was edited on 5/3/24 at 9:10 am
Posted on 5/3/24 at 12:00 pm to Bourre
Fidelity has children’s accounts. You can put it there and do a broad market ETF or mutual fund to return more than savings account. Or, let them buy META and NVDA if they are more risk tolerant.
If they do not have jobs, I am not sure they can invest in Roth IRA.
If they do not have jobs, I am not sure they can invest in Roth IRA.
This post was edited on 5/3/24 at 4:09 pm
Posted on 5/3/24 at 1:18 pm to go ta hell ole miss
quote:
Fidelity has children’s accounts. You can put it there and do a broad market ETF or mutual fund to return more than savings account.
They have a Teen Account. Otherwise it is UTMA and 529s.
Again, when I say Series I are a good option for kids, I mean an easy account to manage in a kid of any ages name.
Posted on 5/3/24 at 3:04 pm to Bourre
Current CD rates and HYSA accounts are still good for the time being (Capital One and Synchrony Bank).
Open up a Vanguard fund (VOO) in your name and put them as the beneficiary.
Open up a Vanguard fund (VOO) in your name and put them as the beneficiary.
Posted on 5/5/24 at 9:55 pm to Bourre
I opened two auto invest brokerage accounts in my name on sofi and just put my kid as the beneficiary.
My kid isn't two yet, but I put $100 every check in it. Its up 13%, mea while the one I use for myself on Vanguard is up 3%
I'd look into some type of brokerage account or if they don't need the money soon, a CD
My kid isn't two yet, but I put $100 every check in it. Its up 13%, mea while the one I use for myself on Vanguard is up 3%
I'd look into some type of brokerage account or if they don't need the money soon, a CD
Posted on 5/6/24 at 2:47 pm to Bourre
Have a custodial account for my 5 year old. Keep adding to a growth mutual fund and it's doing well. Like 28% gain.
Posted on 5/6/24 at 4:49 pm to Bourre
Put it in the Vanguard Total Stock Market Index or the S&P 500 Index and just let it sit there.
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