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Epoch Times
23-05-2025
- Business
- Epoch Times
How to Open a Brokerage Account for a Minor
Yes, your child can become an investor. You can open a brokerage account called a custodial account for a minor, but retain control of it. And when your child reaches the age of maturity, your child can take over the account. But by learning the value of a dollar, saving and investing early on, your child can already be on the path to proper money management and financial wellness. And you have different types of accounts to choose from a variety of brokerage firms that may offer different investment options, competitive fees, and access to human financial advisers. So let's explore your options. Uniform Transfers to Minors Act (UTMA) Accounts The Uniform Transfers to Minors Act (UTMA) accounts are designed to hold a variety of investment options. These may include traditional and alternative investments, such as: stocks bonds mutual funds exchange-traded funds (ETFs) target-date funds (TDFs) precious metals (gold, silver, etc.) real estate works of art A UTMA account is relatively straightforward. You open an account through a brokerage firm and manage the investments. The assets technically belong to the minor. But they can't access these until they reach the legal age of maturity. That's usually age 18 or 21, depending on the state. You have a fiduciary duty to manage the account for the benefit of the minor. But there are some tax rules to keep in mind. This is how the 'kiddie tax' works: The first $1,300 is tax-free. The next $1,300 is taxed at the child's rate (typically 10 percent). Above $2,600, the money is taxed at the parent's marginal tax rate. Uniform Gifts to Minors Act (UGMA) accounts are limited to holding cash, stocks, mutual funds, and insurance policies. 529 Plans A 529 college savings plan is designed to help parents invest in their child's future college education. Contributions grow tax-free, and withdrawals are tax-free for qualified educational expenses like tuition, fees, and supplies required for enrollment. These are sponsored by states and managed by major brokerage firms. Some states also offer tax deductions or credits at the state level based on your contributions. And contribution limits are typically hundreds of thousands of dollars. Your investment options typically include mutual funds and TDFs. Coverdell Education Savings Accounts The Coverdell Education Savings accounts work similarly to 529 plans, but they have stricter contribution and income limits. The maximum contribution to your beneficiary is $2,000 per year. And your modified adjusted gross income (MAGI) can't exceed $110,000 or $220,000 for married couples filing jointly for you to be able to open an account. How to Open an Investing Account for a Minor The process of opening an investing account for a minor, such as an UGMA, UTMA, or 529 plan, is fairly straightforward. It can be done online through a brokerage firm's website in minutes. You generally need the following: Social Security number for you and the beneficiary; personal information like address; and checking account information to fund the account. What to Watch Out For Brokerage firms that offer these accounts vary in terms of quality. They offer different investing options, fees, services, and more. So it'll help to shop around for a firm and type of account that aligns with your overall investing goals. The Bottom Line Opening an investing account on behalf of your minor can be a great way to teach your kids about the value of money and money management. You can start as early as possible, as you would manage the assets. You have options such as UTMA accounts, UGMA accounts, 529 plans, and Coverdell Education Savings accounts. You can easily open one of these accounts online through a brokerage firm. But it would help to explore your options. Weigh points such as investment options, fees, and various services. The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided. Related Stories 4/30/2025 4/24/2025
Yahoo
12-05-2025
- Business
- Yahoo
3 Ways Your Kids Can Start Saving for Retirement Now
According to a new survey from Allianz Life, 64% of Americans fear running out of money during retirement more than they do about dying. One of the best ways to alleviate this fear for future generations is to help your kids save for retirement now rather than wait. Discover Next: For You: By helping your kids save for retirement today, they can take advantage of compound interest, allowing them to accumulate a greater amount of wealth. Are you ready to help your kids with their retirement savings journey? Here are three ways to get started today. Also here are the best bank accounts for kids. One of the easiest ways to help your kids start saving for retirement (or any other financial goal) is to open a savings account. There are no age restrictions and you can keep things simple by opening an account wherever you do your banking. Just make sure it's a high-yield account to earn a meaningful amount of interest. Read Next: Most savings accounts will provide joint access for parents so that you can monitor any money coming in and out of the account. While savings accounts might not help grow a retirement account as quickly as other options, they will allow you to teach your kids good money management skills. Custodial accounts can be set up at most banks or with an investment broker and they are another great way to help your kids begin saving for retirement. Choose from a UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act). Through a custodial account, you, as the parent, can invest in stocks, bonds or mutual funds on behalf of your child. Just keep in mind that while you and your child will have access to the account and be able to make decisions, the account is owned by your child. Once they reach a certain age, the account will be transferred solely into their name and they will be free to use the money as they choose. Because contributions into a custodial account are considered gifts, you need to be mindful so you don't trigger a gift tax. In 2025, any contributions under $19,000 (single) or $38,000 (married filing jointly) are exempt from paying a gift tax. Roth IRAs are a great way to save for retirement. You'll pay tax on your contributions today, but can withdraw your money tax-free during retirement. The biggest downside to using a Roth IRA to help your kids get a head start on retirement is that they will need to have earned income. While many people think this requires a traditional W-2 job, other means of income count as well. For example, if your child earns money from babysitting or mowing lawns, this would be considered earned income. Remember that your contributions can't exceed your child's earned income. More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for Retirees How Far $750K Plus Social Security Goes in Retirement in Every US Region 7 Overpriced Grocery Items Frugal People Should Quit Buying in 2025 12 SUVs With the Most Reliable Engines Sources Allianz Life, 'Americans Are More Worried About Running Out of Money Than Death.' This article originally appeared on 3 Ways Your Kids Can Start Saving for Retirement Now
Yahoo
14-02-2025
- Business
- Yahoo
How to start a savings fund for a baby
As a new parent, there are many details to plan for. Yet saving for your child's future is an important financial responsibility that you may want to start preparing for sooner rather than later. The good news is there are many options available for starting a savings fund for your baby. And even if you only have the ability to put away a few extra dollars each month, making a consistent habit of saving for your child could produce big benefits over time. When you're ready to begin saving cash for your baby's future, you may want to consider setting up a designated, separate account to hold the money. The best savings funds for babies and children feature above-average returns, low fees, and potential tax benefits. Here's a look at four smart ways to start a savings fund for a baby, depending on your goals. Opening a savings account for your baby can be an easy, low-risk way to stash away cash for your child's future. So, if you plan to open a savings account for a child, you may want to consider whether a high-yield savings account (HYSA) might be a good fit for your goals. High-yield savings accounts are deposit accounts that typically offer above-average interest rates compared to traditional savings accounts — as much as 10 times the national average. And if you open a HYSA with an FDIC-insured bank, you can trust that your deposits are safe (up to $250,000 per depositor, per account ownership category). One downside: High-yield savings accounts come with variable interest rates that can go up and down with market conditions. Plus, despite competitive rates compared to other types of deposit accounts, they still don't match the returns you can achieve by investing in the market. High-yield savings accounts are commonly found at online banks, but you should also check with traditional banks and credit unions. It's wise to compare multiple HYSA account options to make sure you find the best rates and account terms available. Read more: The 10 best high-yield savings accounts available today Another way to save money for your baby is to open a custodial account. These types of accounts allow you to save and invest money on your child's behalf. Custodial accounts come in the following two main varieties: Uniform Gifts to Minors Act (UGMA) accounts: UGMA accounts can hold cash and financial investments. You can open these accounts on behalf of a minor family member in all 50 states. Uniform Transfers to Minors Act (UTMA) accounts: UTMA accounts can hold cash, financial investments, real estate, and other types of property. You can open these accounts on behalf of a minor family member, but they're not available in all 50 states. These custodial accounts have no annual contribution limits, but the IRS does impose a gift tax if you deposit over a certain threshold. The federal gift tax limit for 2025 is $19,000 per individual and $38,000 per married couple. Gifting a certificate of deposit (CD) is another option to consider if you're looking for ways to invest money for your baby's future. A CD can be appealing because it offers a fixed interest rate for the entire term (which can range from a few months to several years), which can be particularly beneficial in a falling interest rate environment. The catch is that you must keep the money you deposit in a CD in the account until it reaches maturity. Otherwise, you'll be subject to an early withdrawal penalty. If you want to gift a certificate of deposit to your child, you first need to open the CD as a custodial account — either a UTMA or UGMA (see above). This means your child won't own the CD, at least not until they reach adulthood. And since the age of adulthood varies on a state-by-state basis, the process of transferring the CD to your child once they're old enough can differ. With a UGMA account, your child would need to withdraw the cash from their CD between the ages of 18 and 21 (depending on the state of residence). A UTMA account, by comparison, lets you, as a parent, make withdrawals for the benefit of your child at any time. Once your child (aka the beneficiary) reaches adulthood (18 to 21, depending on the state of residence), they can take control of the CD. Read more: Can you gift a certificate of deposit? As a parent, one of the biggest expenses you may need to plan for when it comes to your child is their college education. A 529 plan could be a great tool to help you accomplish that goal. A 529 plan is a tax-advantaged, flexible savings plan you can use to pay for educational expenses. Parents, grandparents, and other family members can contribute to the 529 plan as well. Plus, you can invest the money in potentially high-return stock funds on behalf of your child, who is the beneficiary. Additionally, as long as the beneficiary uses the money for qualified educational expenses, they won't have to pay taxes on any gains. You may even be able to open a 529 plan for an unborn child if you want to start saving money early. Technically, you would name yourself as the beneficiary in this situation and list your baby as the beneficiary once they receive a Social Security number. It's also possible to change the beneficiary on 529 plans, giving parents more flexibility than some other savings products. But you should also consider the limitations of 529 plans (like the fact that you can only spend the money on educational expenses) before you open this type of account. There's no one-size-fits-all solution when it comes to saving money for your child. Depending on the financial goals you want to achieve, opening more than one type of savings fund for your baby might be the best option. Keep in mind that it's also fine to ask for advice if you're not sure where to start. A trusted financial advisor can help you work through your financial priorities and create a financial plan that makes sense for your family—especially when you're undergoing a major change like adding a new child to your household. Finally, remember that you don't have to start with a huge savings goal if doing so isn't affordable right now. Even if you can only afford to save a few extra dollars per month for your baby, creating the habit of saving is what matters most.
