how do you manage accounts and invest for your kids

[anonmustach3]

My two kids are young (under 10), but I was thinking sometime in the coming months might be a good time to setup some investments for them given the current markets. I already have a 529 for each of them that I contributed a large lump sum when they were born (now I just plan to let them ride and not keep contributing so I don't end up with too much in them). While I don't advocate buying individual stocks with anything more than fun money, I could see my kids actually being interested if I bought them a couple of shares of a company they know and love, such as Disney.

I'm curious how other people handle financial and investment accounts for kids. Do you setup accounts in their names? Or do you just buy shares of stocks/funds in your own accounts and keep track of which kid owns what in a spreadsheet? Do you have savings account (in their name) for their money that you transfer to/from? And/or what ages did you create those kinds of accounts in their names?

I like the idea of having accounts and shares in their own names so they can feel more ownership of the investments. However, it seems like it could be a hassle for tax purposes (eventually) and/or even just putting their information in places it doesn't need to be yet (names, dob, ssn, etc).

[apricotfuzz]

Definitely following for wisdom of others.

Off the cuff, I'd go Robinhood.  Relatively simply UI, fractional shares, etc.

How are you thinking about having your kids help pay/contribute for college? I've started 529s but I also want to create an appreciation for the cost, take the opportunity seriously, etc etc.   Would love any thoughts.

[DaKini]

I have accounts in their name and invest solely in vgwl; at the online broker where my account is too.

They have an account at the local bank of dad, and their allowance is paid in the book there. I regularly talk to them how much they get in. To encourage investing the very generous interest of 2.5%/week which teaches them the magic of compound interest is capped at their age in €. After it is hit i always talk to them if they want to invest some. And if so, i transfer the money and buy via a savings-plan (can buy fractional shares and cost is based in %of the amount without Baseline cost).

Worked good so far. I even used the red numbers to teach a lesson in dividends and paper-value so they get used to the volatility and know what to do and that the number of shares stay the same.

[ctuser1]

What is your goal?

i.e.
1. Are you saving for their college?
2. Are you trying to teach them the concept of earning money, saving and investing?

#1 - 529 is the vehicle I use. I did not find anything better for our situation. I contribute to the NY 529 (I am a NY and CT taxpayer) while DW contrbibutes to the CT 529. We both max out - which comes to $30k/year. We expect no need based subsidies for college, and hence plan to fund the full rack-rate for colleges. If DD gets merit based scholarships - then 529 money will remain available for the next generation.

#2 - I currently use Merrill Edge UTMA brokerage account for DD. I originally opened it for the free trades due to my Preferred Rewards status. Free trades are everywhere now. So, if I was to re-do it I will likely open an account in Fidelity for her (it seems they do offer UTMA as well). The fantastic thing about fidelity is that you can invest any amount in the index funds they have (FXAIX/FZROX etc). e.g. kiddo gets a random $5 allowance from a random relative (say, grandma) - that can go straight into the market. In my Merrill Edge account - I buy Vanguard ETFs for her. I haven't yet found a good way in ME to invest random, tiny sums of money in the market for a low cost.

[anonmustach3]

How are you thinking about having your kids help pay/contribute for college? I've started 529s but I also want to create an appreciation for the cost, take the opportunity seriously, etc etc.   Would love any thoughts.

The current plan is to pay for it completely but I understand the desire to have kids help. My situation probably sounds a bit strange to most people and probably isn't helpful advice- when my great grandfather came over to the US he worked various trades and had 3 daughters. He said that a college education was the best way for them to get ahead so he paid for their college (this was back in the 1920s and 1930s) with the stipulation that they needed to do the same for their kids. That's what our family has continued to do for each generation. Because of that I have a pretty strong appreciation for what my parents (and grandparents and great grandparents) have provided. Obviously things change as generations go by and college isn't always a slam dunk, so we'll take the expectation in stride at the time- if the standard college route isn't a fit for one of our kids or if they want to go to an Ivy and don't have scholarships we won't "just pay for it." If I were in any other boat I'd likely expect my kids to help with at least a portion, perhaps 50% so there's a feeling of equal contribution. I'm not sure.

I have accounts in their name and invest solely in vgwl; at the online broker where my account is too.

Are you concerned at all about tax or FAFSA implications down the road? I have no idea of we'll qualify for anything on the FAFSA but my understanding is that assets in the kids name are weighted more heavily than if they're in mine. Perhaps the benefits of a kid feeling ownership of their accounts outweighs the potential risk of a hit to the FAFSA. Given my income and net worth there's also a very good chance we won't qualify for any aid anyway.

What is your goal?

i.e.
1. Are you saving for their college?
2. Are you trying to teach them the concept of earning money, saving and investing?

I'd say both. For college we have 529s in our names and the kids as the beneficiary. We went with Nevada's 529 (managed by vanguard) since we don't get any state benefits. We've also kept the sum small and plan on most of our contributions to come from our taxable accounts just to avoid over investing in 529s.

Thanks for the advice!

[anonmustach3]

I have accounts in their name and invest solely in vgwl; at the online broker where my account is too.

Are you concerned at all about tax or FAFSA implications down the road? I have no idea of we'll qualify for anything on the FAFSA but my understanding is that assets in the kids name are weighted more heavily than if they're in mine. Perhaps the benefits of a kid feeling ownership of their accounts outweighs the potential risk of a hit to the FAFSA. Given my income and net worth there's also a very good chance we won't qualify for any aid anyway.

Ah, I just noticed your location so the FAFSA probably isn't a concern :) Nevermind.

[DaKini]

I don’t know what FAFSA is but here my kids pay their own taxes. That is theoretical since we have a tax break of about 8k per person. That will not be reached anytime in their childhood especially as this will only concern dividends as we are not settling.
The income there therefore is more protected in our tax regime because it’s nowhere on my book, it’s entirely theirs. Which may be a problem when their turn 18 because it’s all theirs and i loose any (legal) say in it on their 18 birthday. But that was considered at the time we set this up.

Edit: to add, we unfortunately have no such nice tax saving vehicles here in Germany. The only options available go through insurance contracts and nasty stuff like that, what side effects not very appealing as a long term investor...
So investing in taxable is the only option to do it cheap and keep the assets under your own control.                   

[bwall]

One thing to keep in mind when setting up accounts in kids names--if it's in their name, it's their money. Not a problem when they're kids and still listening to you. But if they're 19 or 22 and want to buy a car, go on vacation, or spend a weekend with hookers and blow, then there's nothing you can do about it.

Of course, with that in mind, you can always correct for such ridiculousness to make sure it doesn't happen.