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FirstMate
My lil cowboy
Member since 10/10 7789 total posts
Name:
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WWYD - kids gifted money
My kids were recently each gifted a nice amount of money. I want to invest it or put it in a proper account for them but I'm not sure what to do. I don't want to put it in their 529 because, if they don't go to college, I still want them to have access to the money without getting huge tax penalties. Someone else suggested a UTMA but that seems a little complicated. Any suggestions?
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Posted 6/28/21 11:24 PM  |
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drpepper318
MIR MIR MIR!
Member since 6/07 8274 total posts
Name:
me
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Re: WWYD - kids gifted money
Maybe a CD? Look around for best % interest you can find.
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| Posted 6/29/21 12:31 AM |
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WWYD - kids gifted money
It depends on what you want to do with it; save it or invest it for them? If just a low risk savings, I would suggest a CD. If you want to invest for them, I would do a brokerage account. I have one set up for each of my kids through fidelity to save money to gift to them when they are 21. It’s not much but a primary financial goal of mine is setting them for a good life so anything I can do to help I will. The fees are very low. I have a few accounts with fidelity for retirement and I’ve always been happy with them
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| Posted 6/29/21 7:39 AM |
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Sash
Peace
Member since 6/08 10312 total posts
Name:
fka LIW Smara
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Re: WWYD - kids gifted money
My husband put a portion of my son money in a Robinhood account. I was skeptical but the return has been great within the past year. He does monitor it. Rest in a kids savings account and CD.
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| Posted 6/29/21 8:07 AM |
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ali120206
2 Boys
Member since 7/06 17789 total posts
Name:
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WWYD - kids gifted money
We have some money in a 529 but we also have UTMAs set up for the kids.
Interest rates are pretty low - so savings and CDs aren't yielding much.
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| Posted 6/29/21 9:13 AM |
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LSP2005
Bunny kisses are so cute!
Member since 5/05 19453 total posts
Name:
L
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Re: WWYD - kids gifted money
UTMA accounts are easy to set up. All you need is a birth certificate and SSN for your child and you. If you already have accounts at the bank, it might just be documentation signatures. As for where to put the money that is a trickier question. Remember UTMA money belongs to the child at 18. Do you want them able to access the money then? We invested our kids money, leaving very little as just cash savings. It gives a much better return that way. You can invest in a UTMA brokerage account or 529 account.
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| Posted 6/29/21 9:29 AM |
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FirstMate
My lil cowboy
Member since 10/10 7789 total posts
Name:
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Re: WWYD - kids gifted money
Those of you who invested the money, did you put it in a mutual fund or just rolled into stocks?
Does the UTMA actually invest money? I'm confused about it. Many years ago, when my oldest was born, I opened one for him through Fidelity with $500. Nothing crazy. I recently got a statement from Fidelity and it said the balance on the account is $500. So basically it's been sitting there for 10 years doing nothing? I have to call Fidelity to figure out what happened there.
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| Posted 6/29/21 10:42 AM |
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RainyDay
LIF Adult
Member since 6/15 3986 total posts
Name:
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Re: WWYD - kids gifted money
Posted by FirstMate
Those of you who invested the money, did you put it in a mutual fund or just rolled into stocks?
Does the UTMA actually invest money? I'm confused about it. Many years ago, when my oldest was born, I opened one for him through Fidelity with $500. Nothing crazy. I recently got a statement from Fidelity and it said the balance on the account is $500. So basically it's been sitting there for 10 years doing nothing? I have to call Fidelity to figure out what happened there.
It's prob just sitting in a cash management account which doesn't earn you anything. You would typically have to decide what funds or investments you want the money to be invested in.
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| Posted 6/29/21 10:45 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: WWYD - kids gifted money
The money isn't locked in a 529 if you don't go to college and there are other avenues to get access to the money. There are other tax advantages of having the money in the 529 even if you pull it out via penalty. Read the below link in it's entirety before deciding against a 529.
https://www.savingforcollege.com/article/college-savings-penalties
I have been putting money in a NY based 529 and when I do that the money placed in the 529 is a deduction off my NYS taxes (up to 10k) so even if my son doesn't go to college I make up some of the 10% penalty by taking the NYS deduction now on my higher tax bracket.
With that said if 529 isn't for you, just open an investment account somewhere and place money there. Robin Hood, Chase Self Directed YouInvest, Etrade, etc.
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| Posted 6/29/21 10:46 AM |
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ali120206
2 Boys
Member since 7/06 17789 total posts
Name:
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Re: WWYD - kids gifted money
Posted by RainyDay
Posted by FirstMate
Those of you who invested the money, did you put it in a mutual fund or just rolled into stocks?
Does the UTMA actually invest money? I'm confused about it. Many years ago, when my oldest was born, I opened one for him through Fidelity with $500. Nothing crazy. I recently got a statement from Fidelity and it said the balance on the account is $500. So basically it's been sitting there for 10 years doing nothing? I have to call Fidelity to figure out what happened there.
It's prob just sitting in a cash management account which doesn't earn you anything. You would typically have to decide what funds or investments you want the money to be invested in.
DH actively invests the funds in the UTMA account.
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| Posted 6/29/21 11:01 AM |
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LSP2005
Bunny kisses are so cute!
Member since 5/05 19453 total posts
Name:
L
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Re: WWYD - kids gifted money
If you stick money into a UTMA it is just like putting money into a savings account. You can also invest money in a UTMA if it is at fidelity or Schwab. At a regular bank it is just a savings account.
UTMA means uniform trust for minors account. It basically means that at 18 or 21 depending upon the state, the kid will have automatically gained control over any money in the account. It is up to the parent to act in the best interest of the child and the account should not be treated by a parent as a slush fund.
Within a UTMA if it is created at a brokerage firm, you can have the money in a savings account or you can buy individual stocks, or mutual funds.
If you put money into a 529 that money is invested for you based on the asset allocation you chose when you established the account.
You can also buy individual CD but they are not paying great interest rates now. You can also buy bonds but you no longer get the piece of paper. It is all electronic for savings bonds.
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| Posted 6/29/21 11:56 AM |
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nycbuslady
LIF Adult
Member since 9/15 1063 total posts
Name:
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WWYD - kids gifted money
I would not just put it in a bank. I agree that a 529 is good. And, depending on your kids' ages, I would put it in rather risky funds. The stock market has been great lately (but, of course, who knows what the future holds). My daughter is 12 and we have been contributing for all those years. The account has DOUBLED! It's pretty amazing!
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| Posted 6/29/21 12:19 PM |
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seaside
LIF Adult
Member since 6/08 3101 total posts
Name:
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Re: WWYD - kids gifted money
Posted by nycbuslady
I would not just put it in a bank. I agree that a 529 is good. And, depending on your kids' ages, I would put it in rather risky funds. The stock market has been great lately (but, of course, who knows what the future holds). My daughter is 12 and we have been contributing for all those years. The account has DOUBLED! It's pretty amazing!
This. 529's are great & they can be transferred to other people if need be--even down generations.
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| Posted 6/29/21 6:52 PM |
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