Allocating Assets Based on Your Child’s Age

If you have children, it’s only natural to want to help them become financially stable later in life, especially with tuition rates constantly rising. After all, it will be much easier for them to attend college and save for large purchases like a car and a house if you can help them out now.

If you have children, it’s only natural to want to help them become financially stable later in life, especially with tuition rates constantly rising.No matter the child’s age, you can help fund his or her savings.


One of the best ways to ensure that your child has funds for college is to begin a 529 Savings Plan early in his or her life. With this type of savings plan, you have full control of the fund; however, anyone, no matter what age, can contribute to it. It’s also available in just about every state, though state plans may differ.

“An additional benefit with a 529 Plan is that if the child says he or she doesn’t want to go to college, the parents or whomever owns the account can change the beneficiary,” says Kelly Campbell, a certified financial planning professional and founder of Campbell Wealth Management in Alexandria, Virginia. “That way, you know the money will be used for education. They can’t just take it and run.”

Elementary Age

UGMA and UTMA custodial accounts are funds specifically set up by a parent on behalf of a minor that offer decent tax breaks for those under the age of 18. With a UGMA or UTMA account, the first $1,000 in gains is tax-free, the second $1,000 is taxed based on the child’s income tax rate and the rest of it is taxed at the parent’s income tax rate. The money belongs solely to your child, and you as the parent are allowed to make withdrawals only to meet your child’s expenses — computer equipment, textbooks, etc.

While UGMA and UTMA accounts are not specifically for college savings, the contents can certainly be used toward that. However, it’s the recipient’s choice of how he or she would like to use the money, so that’s something to keep in mind.

“If money is in a UTMA or UGMA account, it becomes the beneficiary’s at the age of majority, which is 18 to 21, depending on the state,” says Michael Kay, a CFP professional and president of Financial Life Focus, a financial planning firm in Livingston, New Jersey. And there’s no legal way to stop them from using that money for other purposes.

College Age

A variety of states these days allow parents to use a prepaid plan to purchase tuition at the current rate, which goes up each year by approximately 8 percent, according to financial aid website You’re typically allowed to use these locked-in rates at any school in the country, even a private university, making it one of the best values in terms of savings plans.

“[Prepaid plans] take market volatility out of the equation,” says Nancy Farmer, president and CEO of the Private College 529. “You don’t have to watch the market. It’s done. College is paid for.”

Young Adults

For those with a son or daughter who is, say, about to begin his or her first job, one investing option is setting up an individual retirement plan. These days, parents are able to help their kids with their finances by opening a Roth IRA in the child’s name.

When the child turns 18, he or she is able to gain control of the account, but restrictions on Roth IRA withdrawals prevent investors from taking earnings out penalty-free until the age of 59½. There is also the option of opening a trust in the child’s name, but these accounts may acquire legal and administrative fees that you won’t encounter with a Roth IRA.

To start a savings plan for your child, contact us today to learn more about the aforementioned and see what we have to offer.


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