Starting A savings account For your grandchildren

[maslex]

Just curious if anybody has started a saved as account for either their child or grandchildren. I would like to open an account for each of my Is grandchildren but I don't want Them to have access to it until they're 18. The plan is to deposit money each birthday and Christmas. So is there a special type of account I need to open or just a regular savings

 

[MillauFr]

You can open a UTMA account at Fidelity.

 

[RoseGold]

UTMA gives instant access at 18 (or sometimes 21 by state). If this is a significant amount of money, the right way to do this is a trust. If it's just a little money, I'd just do an account in your name.

Accounts in the kid's name matter when it's time for financial aid for college. If that's on the table, putting anything in their name could be a very bad idea.

 

[Travel60]

You could do a 529 plan for educational expenses.

 

[RogueX]

Just curious if anybody has started a saved as account for either their child or grandchildren. I would like to open an account for each of my Is grandchildren but I don't want Them to have access to it until they're 18. The plan is to deposit money each birthday and Christmas. So is there a special type of account I need to open or just a regular savings

My husband and I opened a savings account for our daughter once she was no longer in any after school care/early morning babysitter care. We used the money we were paying out for those services for her savings account.

The credit union that we use has a high yield account that matures after a year, so in addition to savings, we have a checking account for the withdrawals for the high yield account to draw from. At the end of the year when it matures, that is deposited in her savings. So far it has worked out well for us.

When she turned 16 she was given access to her accounts, has a debit card in order to learn financial responsibility and how to manage money with some supervision.

 

[sam_gordon]

My thoughts...

Talk to the parents. Tell them what you want to do and have THEM set up the accounts. It would be a good idea to have someone other than yourself have access to the accounts "just in case". If you don't trust the parents to not raid the account, that's a different story.

The other thing you can do is contact a bank in the town where the kids are. I'm sure they'll be able to help you.

And why pick 18? I would suggest 16. They can use the money towards a car (or college) or save it for later.

 

[SueInBoston]

I had 3 types of account for my kids:
a regular checking account tied to my account that they have debit card to use
an UTMA account only I can access (this is for the bigger money deposits that I didn't want them having access)
an 529 with Fidelity with regular payroll deduction

We had to close out the UTMA when they turned a certain age, maybe 18? and they had to be present
529 funds has to be used for college related expenses or you take a hit on taxes, we still have $$ in there that I'm not sure what to do with if DS doesn't want to finish college.

 

[eticketplease]

I have a UTMA account at Ally as well.

Remember you can also buy I bonds from treasurydirect.gov. The minimum buy in is only $25 so great for a part of a gift or as @Travel60 mentioned a 529 is available as well if you have state income tax some states reduce your state tax liability by using their 529 plan.

Remember whatever decision you decide to go with please do your research as we can't all date French models the shown in the old State Farm commercial

 

[_19disnA]

Talk to the parents.

I agree. It would be far less complicated for small annual amounts as gifts if you gave the money to the parents to save on behalf of their children unless there is a reason to not want to involve them. This way the parents would know of your intentions and be appreciative of annual gifts. If we are talking large sums of money that is somehow related to estate planning or what you want to distribute in your will, I would talk with a lawyer and/or financial advisor about that.

 

[QueenIsabella]

Here's what my MIL did with her 7 grandchildren:

UTMA accounts all around

1 529 per side of the family--they can be rolled over. Currently, my third child is depleting this.

Life insurance payable to the grandkids, in trust--they get 25% upon obtaining a bachelor's degree, the balance at age 30--this was done to avoid estate taxes at the time. Estate tax laws have since changed.

In-kind gifts, ranging from paying college tuition to paying for vacations and school trips (out of the country)

$500 checks on birthdays and Christmas. This was way too much, IMHO, for my kids--we'd have them put it in the bank. Later, on a family vacation, we'd take out souvenir money and tell the it was a gift from grandma.

If you have this level of funds to gift, I strongly encourage the gift of financial literacy. I grew up poor--never in my wildest dreams did I imagine I'd be raising kids with trust funds. But, I feel strongly that DH and I have to be good fiduciaries of the family money (not that we're Rockefellers or anything, it's more about preserving the gifts my kids have been given). Only one of our kids seems to care much about money--he wants to invest in stocks (and tracks them daily). The others just leave it alone for the future. 2 of my nieces used their windfalls to purchase their first homes. So overall, I'd say the money's being handled well.

 

[tvguy]

We have a savings account for our Granddaughters, but it is in my wife and my name. Their parents don't know about it, and at 3 and 8 months old, they are too young to be told. Our hope is to do what my mom did with our daughter. When our daughter started College, she surprised us by saying she had set aside money for College, and she used it to pay our daughters first year of college tuition, room and board and books. She also gave both our kids a $1,000 Savings bond every year for their birthday and Christmas. So both kids had a nice nest egg for college with the $5,000 a year we set aside for the college fund, HOWEVER, all that money was under the control of my wife and I.

Never used a UTMA account, but I did set up a UGMA investment account for my son which is a similar program. I need to get my name off that account as my son is now 35 and turn it over to him but that is a huge hassle. It isn't a huge amount of money, less than $1,000 and I claim the dividends on my taxes, but the dividends are so low that doesn't amount to anything. Just makes me glad I didn't put the other money in a UTMA, UGMA or 529.

 

[White Cat]

There are several ways to go about it. I would suggest though making the turn over age much older than 18.

 

[barkley]

Accounts in the kid's name matter when it's time for financial aid for college. If that's on the table, putting anything in their name could be a very bad idea.

as well, and ideally it never becomes an issue-if the child has special needs or devastating medical costs down the line it could disqualify them for certain programs they could tremendously benefit from. i dealt with this administering eligibility to the public for programs and then had to explain to my mom w/her estate planning that b/c our youngest has special needs her generosity could better benefit him if an account was NOT put in his name but set up to still benefit him (it is devastating to have to tell someone with high 5 if not 6 figures in medical costs that their private insurance won't cover that b/c their child has a nice savings account set up by a well meaning family member that they can't qualify for a program that would drop those medical bills down to pennies on the dollars and help them avoid bankruptcy).

 

[LuvOrlando]

My State run 529 for the kids was the only investment that didn't take a hit in the past few tumultuous years, or ever. What's nice with these is we didn't need to pay state tax when we made the deposits & can lock in suspected tuition to current prices for a school the owner guesstimates. No-one is forced to stick with those choices though, so it's a safety without a hitch, plus you can move money around between different family members associated with the account or self so probably you can even it out between all the grandkids as the family grows. Actually, in the end you can even make un-qualified withdrawals by just paying the corresponding small tax amount in the year that the withdrawal is taken. So let's say the kid turns 18 and doesn't want to go to school, all you need to do is withdraw and say it's not for school and pay whatever the tax is which was very little and then hand it over.

Finding the state ones can be tricky as it seems private ones try to be misleading, the tax incentive is the giveaway though, only way to be sure is to go through the state website.

 

[georgina]

I had 3 types of account for my kids:
a regular checking account tied to my account that they have debit card to use
an UTMA account only I can access (this is for the bigger money deposits that I didn't want them having access)
an 529 with Fidelity with regular payroll deduction

We had to close out the UTMA when they turned a certain age, maybe 18? and they had to be present
529 funds has to be used for college related expenses or you take a hit on taxes, we still have $$ in there that I'm not sure what to do with if DS doesn't want to finish college.

529 funds can be transferred to other children to use for education, used later for grad school, or transferred to grandchildren.

if a child receives a scholarship, that amount of 529 money can be withdrawn without paying the 10% penalty on earnings ( I believe tax on the earnings might still be owed ? It’s been a while.)

 

[cvjw]

We had UTMA accounts for our sons - their grandparents were very generous over the years. Those accounts were a PITA. At age 18, both kids had to go to the financial planners office and sign paperwork to end the UTMA and roll all funds into normal brokerage accounts.

Technically, all the funds are in our kids names now, but we still have access and oversee their money to make sure they are making good decisions.

 

[QueenIsabella]

We had UTMA accounts for our sons - their grandparents were very generous over the years. Those accounts were a PITA. At age 18, both kids had to go to the financial planners office and sign paperwork to end the UTMA and roll all funds into normal brokerage accounts.

Technically, all the funds are in our kids names now, but we still have access and oversee their money to make sure they are making good decisions.

We had control of our kids' UTMAs until age 21. It depends on the state you make the UTMA in--in our case, it was NY.

I don't know why you still have access and can oversee things, unless your kids are sharing the information with you voluntarily. The only access we have to DD27's accounts is the insurance payout mentioned above, that she'll get when she's 30. She handles everything else herself, no input over oversight from us needed or wanted. I DO have access to DS25's accounts, but we set up a special trust for that. He's autistic and has impulse control issues. Luckily, he's self-aware enough to know this, so he agreed to the trust. Any withdrawal requires both our signatures--but, he can change that at any time, by seeing our estate lawyer.

 

[aprilgail]

Just curious if anybody has started a saved as account for either their child or grandchildren. I would like to open an account for each of my Is grandchildren but I don't want Them to have access to it until they're 18. The plan is to deposit money each birthday and Christmas. So is there a special type of account I need to open or just a regular savings

my daughter grandmother and her uncle took out 529's for my daughter to help her with college.

 

[amylevan]

My parents give my kids a check for every Christmas and birthday. We take the money and split between a savings account in their name and a 529 account. They do it this way so that they don’t end up gifting a large amount at one time in the future.

The money in the savings account is theirs to access in their late teens for things like car, car insurance, etc. The 529 is for college or trade school.

 

[clh2]

We have a 529 for each of our grandsons. Instead of doing a birthday or Christmas gift, we simply make a predetermined deposit every month. We also feel that because of this, we do not need to go “all out” and compete with 2 other sets of grandparents.
***We do get them some fun stuff, just don’t need to compete with the chaos of divorced grandparents and their spouses.