Saving for a friend's kid

[pirate_wench]

Hello parents. I want to save money to give to my friend's children when they graduate from highschool (one is 4, and the other is due in a month).  I have never given my nephew gifts, and don't plan to start with the new baby, because I don't want to "buy their love" (He LOVES me despite no toys given over the years.  We spend a lot of time playing though!).  Instead, I want to start saving/investing the money I would have spent, or what is normally spent, to give to them as a lump sum 14-18 years from now.

I looked into 529 plans but they require I get ahold of the child's SSN. I am close to my friend, but don't think that is an appropriate thing to ask for. I have brought college and retirement savings up in the past, and am pretty sure they have not started a 529 plan themselves....Plus, that wouldn't be much of a surprise.

What do you guys think? Should I even keep what I'm doing a secret from the parents? Or is it better to talk to them again? I don't want to step on any toes. Or should I stop being so weird, and start giving them legos like normal people?

Right now my solution is to set up some accounts in my name, but make the children the beneficiaries, then when they turn 18/graduate from highschool, hope for the best that they spend it on education. Ah, what do I care.  They should spend it on a trip around the world if they want (another reason not to get the 529).

Any advice? Any advice on how to set up the accounts?

Thanks!

[Thegoblinchief]

I have a part of my Roth in a Vanguard 2040 Target for my kids and our godchildren. It won't be a ton in 10 years, but it's better than a below inflation savings account.

Gift money and a small percentage of our free cash flow gets added to it. They all get way too much crap. I'm trying to gently encourage monetary gifts, but it's hard to do this without offending people.

[MDM]

Gee, looks like a perfect application for a KISS Trust.*




*In case you missed it, please check https://forum.mrmoneymustache.com/investor-alley/kiss-trust-has-sent-a-legal-threat-to-this-blog/ before you believe that was a serious recommendation.

[MDM]

Ok, now that I've temporarily exorcised sarcastic impulses - anything you would legally assign to a child requires the child's Soc. Sec. number.  That's how all our kids' UTMA (aka UGMA) accounts work.

Seems you have a choice: either go the formal route with the 529 (or whatever) after serious discussion with the parents, or go the informal route.  If informal, you could give Clark Howard Gift Certificates which they can then put in their own accounts (as goblinchief suggests).

[TomTX]

Ok, now that I've temporarily exorcised sarcastic impulses - anything you would legally assign to a child requires the child's Soc. Sec. number.  That's how all our kids' UTMA (aka UGMA) accounts work.

Seems you have a choice: either go the formal route with the 529 (or whatever) after serious discussion with the parents, or go the informal route.  If informal, you could give Clark Howard Gift Certificates which they can then put in their own accounts (as goblinchief suggests).

Legally assigning the funds to a kid makes getting college financial aid more difficult. The formulas assume anything in the kid's name will be pretty well depleted as a contribution. Less so for parental funds, and funds someone else would contribute yearly to college aren't considered at all.