June is upon us and it’s graduation season! This made me think of all the things that parents do to get their kids through high school. Saving for our kids’ future is often one of these things. There are a variety of ways this can be accomplished; however, there is not a one-size-fits-all solution. The best way to save for your kids will depend on several factors. The two biggest are: what do you want the kids to use the money for? and how much control do you want to maintain? Based on how you how you answer these questions, there are several ways to go. The first way is the simplest: open an account in your name and Social Security Number. Segregate this money as savings for your kids. This may not seem like a fancy solution, but remember the qualifying questions. By saving this way, you keep total control of the money and can decide when and if to give it to your kids. If you want your kids to use it for college and they don’t want to, you can simply not give it to them. This is the one way where you keep total control and there are no conditions on how the money is used. The main downside to this is that there is no tax advantage to this type of strategy. Another consideration is that grandparents, godparents, aunts, uncles, etc. may not want to write a check to you when they want to give money for your kids’ future. The second way is to create a custodial account for your child. A custodial account is made with your child’s name and social security number, but has you as the custodian. This means that while you control the account (investments and what the money is used for) the money belongs to the child. At a certain age (usually age 21 in Washington), the account is turned over to the child. The advantage is that the earnings and capital gains are reported on the child’s social security number. The disadvantage is that any money put into this account is an irrevocable gift that cannot be taken back. If the child decides to take their account to Vegas when they turn 21, there’s nothing to stop them. If you want to save specifically for a child’s college education, a 529 Plan is a great way to do this. This type of plan lets you invest in mutual funds for longer term growth, and if the money is used for college, all the growth is tax free. Another advantage is that the account is still owned by you. So, if you decide you don’t want to give it to the child, you can change the beneficiary on the account. This also means that on the FAFSA (financial aid form), the asset counts as the parents’ and not the child’s which is weighted less when calculating the family responsibility for education costs. The disadvantage is that if the money is not used for college, the earnings are penalized 10% and taxed as income. (Here in Washington state, the counterpart to the 529 plan is the WA GET program, which is a topic for a blog all its own) The final way is somewhat limited and a little outdated. The IRS code provides for a special type of account called the Coverdell Educational Savings Account. Sometimes referred to as an educational IRA, this account acts much like the 529 plan. Contributions are made into the account with after-tax money. If the money is eventually used for educational purposes, then the withdrawals are tax free. The main advantage to this account is that it can be used for educational expenses before college (private schools, pre-schools, etc.). The biggest disadvantages are that you can only contribute $2,000 per year for each child and that the ability to contribute may be limited by your income. Saving for their children is something that most parents want to do. Whether it’s for college, a car, or a house, we’d like to give our kids a little head start as they enter the world. And, as with retirement planning, it’s important to get it right. Choosing between the different accounts and available investments can be a difficult task. But at Verity Credit Union, we can help. Call Bre Lowry at 206-361-5312 to schedule an appointment with a financial advisor and start investing for the future. Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
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A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.
*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.
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