Set up a UGMA account for your kids and secure their future beyond college
This blog post is in partnership with Responsival. As always, all opinions are my own.
If you’ve read my blog before, you know that we have opened 529 plans to help pay for college for all 3 of our kids. It helped us to be prepared for the rising costs of college. Today I want to talk about something related – setting up a UGMA Account. UGMA stands for Uniform Gifts to Minors Act, and way to save money for your kiddo’s future (beyond college). We all want to do the best we can for our children and help them to set up their future. In this post, we’re going to talk about the benefits of setting up a UGMA account for your kids!
I remember graduating college and my parents telling me that they had an account with some extra money for me, which I then used to buy a fancy computer that cost more than what I was making at my first real job. If I was as fiscally smart then as I now, I would have taken that money and either invested it or used it to be able to start a fund so I could eventually buy a house. That was a UGMA accounts! And I bought a freakin computer! As my 18 year old would say, “Stupid, stupid).”
Unlike 529 plans, which can only be used for educational expenses, a UGMA account is a legal way to put money or assets (like stocks or bonds) aside for your offspring. It’s a type of custodial account (meaning it’s managed by an adult on behalf of a minor). Since minors cannot enter into contracts, a UGMA account follows a state statute’s terms, so it can be simpler to set up and a wonderful idea to start their after college life.
Now that my oldest has graduated high school and is taking a Gap Year in Israel, the next account that we set up for him will be a UGMA account. Frankly, we should have opened it earlier. For my oldest, we want to help him plan for his future and start saving for life’s bigger expenses, like a home and a car (although he’s not driving yet and he will be away at college once he gets back). I hope to teach him that he does really need to think financially about his future, because I didn’t – but my husband did and bought an apartment in his mid-twenties. Clearly that
After you open a UGMA account, when your kids are old enough to access it, encourage your kids to think bigger (no, this cannot go towards a tattoo!). Encourage your now older kids to do some research with you and taking the money in that UGMA account and opening a new account to save up to buy a home can be a terrific first step in establishing independence post college.
I admit I didn’t think about moving out of my parent’s house at 22, my salary at first real job, at the Food Network was really tiny. I didn’t look forward into the future and think of what I wanted. I lived at home and then rented for years after I moved out. Putting that money towards a mortgage would have been a lot smarter. We’re raising our kids now to be financially more responsible and opening a UGMA Account, alongside their 529 plans just makes cents (see, a pun!).
No Tattoos or Alpacas
UGMA accounts give your child a head start. Keep in mind that you may need to pay some taxes on UGMA accounts. You can start small with the UGMA account (make sure you check out the benefits) and by the time your kids are old enough, they will thank you for helping to shape their financial future. Setting up a UGMA account for your kids can secure their future beyond college. And no, pet alpacas aren’t a good idea either.
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