I don't think it's selfish. I think it's prudent. I set up a separate account (not an UTMA) which we're using to invest for our children. When they get old enough, we will gift it to them.
For college savings, we bought a state pre-paid tuition plan. Our intention is to be FIRE-able but still working when they are in college. If they don't end up going to a private or out-of-state college, the pre-paid plan converts to a 529 balance, and we pay for them from up to 100% salary (living off of savings). Any shortfall will be handled with either loans or out of the savings, depending on the situation.
Glad you approve:) I probably think this way because its kinda what my parent's did. They had (have) money and I didn't get whatever I wanted, but they did help my buy a car when I needed one, and go to college in the states etc. If I'd wanted to buy a motorcycle I think they would have said no (I also think they were ok giving me money because they knew I wasn't going to spend it on a motorcycle in the first place)
A separate account in our name, but destined for our child is a good idea. Might consider that at some point.
It seems like a 529 is counted equally (~5%) as parents other assets so might not be a huge difference vs a taxable account.
http://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php
Of course that page reinforce how important it is that your child has no assets of their own. They'd be expected to contribute 20% of if per year to college! Once he earns his first dollar it goes into a roth IRA, any future savings goes in our name. Until he either finish college, or decide not to go.
My FIRE spreadsheet also project we'll be around the magic 25x expenses when our son goes to college, or a little before. I'd really like to be able to quit or go part time then to reduce our income. That would be optimal plan.
Correct me if I am wrong, but I was under the impression that a custodial account set up as a ugma or utma is the child's and the child's tax rate applies as follows: up to $1,000 of interest/dividends/capital gains are untaxed, the next $1,000 is taxed at the child's rate (which should be 0% in nearly all cases), and anything above that get's taxed at the parent's marginal rate.
So if you are in the 25% tax bracket and set up an account intended for the child (but legally in your name), the interest/dividends/capital gains will be taxed at your tax rate. But if you set it up as a ugma/utma then the first $2,000 in gains/dividends is taxed at 0%. (since capital appreciation would remain unrealized I calculate it would probably require a balance of $100k to achieve $2,000 in dividends)
If the parent is low income then the tax consequences probably won't matter (either free for the kid, or most likely free for you anyway if you are below the 25% bracket*). However if the parent is in a higher tax bracket the ugma/utma account will offer some tax relief, at least to the point that it generates less than $2,000 per year. If the amount you have invested generates more than $2,000/yr I would think it's very likely that the parent is in a high tax bracket (how else could you gift a child that much money unless you earned enough to put you in a higher tax bracket?).
*This only applies to federal tax rates though. If I keep the assets in my name and they generate dividends I will pay no federal income tax, but I will get dinged for state income taxes, where as in a ugma/utma account the assets are not mine and I won't get dinged for the taxes.
I see some benefits to using a ugma/utma account, and no draw backs besides the fact that you relinquish control of the assets to the minor once they are no longer a minor**. I am not concerned with the child taking control at age 18. I will try to teach them to be fiscally responsible, but ultimately it is their money and they can use it however they see fit once they become an adult.
**And also that the assets will be more heavily weighted into FAFSA consideration than a 529 account or the parents assets. The child will know ahead of time if they plan to attend university though, so you can roll it into a 529 account in order to get preferential FAFSA treatment. Since the balances my nieces will have should not trigger any tax consequences in a ugma/utma account anyway I see no advantage to using a 529 account until it is time to apply to FAFSA.