Starting to Invest for Teenagers, Brokerage acct or 529?

Investing
#1

Thanks for the bonus chapter, Jeremy! Really helpful for me as I loved to learn about how to save for kids!

I want advice from others…I have two girls and finally able to invest a little for them for college (if they decide to go…). One daughter who is a Freshman in High School, the other in 6th grade (Middle School), My older daughter has said she doesnt want to do traditional college but who knows how many times her mind will change in the next 3 1/2 years. Would love some advice if I should just open a brokerage under my name for both of them at this point? Or brokerage for my older one and 529 for my little one since she is still only 11? Thanks for any advice you can give!

#2

Hi Monica!

Few things come to mind when debating to open brokerage accounts under your name, your daughters’ names, or 529 accounts in your situation.

  • 529 accounts are meant to be used for higher education purposes. There will be a penalty if the money is not used for higher education purposes.
  • You are able to change the beneficiary of the 529 accounts from your older daughter to your younger daughter
  • If you plan on applying for FAFSA, assets under your daughters’ name would have a greater impact than assets under your name. 529 assets are considered parent assets.

If you believe at least one of your daughters will attend college, you may consider opening a 529 account for each of your daughters.

If you are unsure if either of your daughters will attend college, you may consider opening a brokerage account under your name and earmark the money for your daughters.

If you do NOT plan on applying for FAFSA for your daughters, then you may consider gifting the money to your older daughter and have her open a brokerage account.

Please verify this information with your brokerage firm and FAFSA.

Good luck!