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Putting money away for kids?

J
Jiffy3687 · · 2 replies

Hello all, I'm looking for advice on putting money away for my kids to access around when they turn 18. I don't necessarily want to do a 529, because I want them to have the freedom to do what they want with the money (i.e. travel, buy a house, etc.) Is a brokerage account the right route? Then they can withdraw the money as they see fit, or keep investing, or both? Looking for advice. Thanks in advance!!

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Replies (2)

Josh M.

Josh M.

3 months ago

I also am putting money aside for my kids, and likewise do not want the constraints that come along with a 529. I know it's not "tax optimized", but we are just using normal brokerage accounts. That way they have flexibility when we decide to give them the money/stocks.

To help minimize the capital gains when we do transfer the accounts to the kids, I donate the appreciated stock to church/charity as part of my normal giving. I then re-purchased that same index in the same account, essentially resetting the cost basis

lindsay

lindsay

3 months ago

How much money are you thinking about? And does your child have any earned income?

At least with older kids who hold down part-time or summer jobs, one cool option is to deposit as much into a custodial Roth IRA for the child as the child earns, up to the max. Contributions can be withdrawn without penalty for any reason, and up to $10k of earnings can too (under current law) for things like a first-time home purchase. Never mind the ordinary benefit of adding so many years to their potential tax-free growth of earnings if your child grows up to prefer investing over spending!

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