Every parent wants the best for their children and making sure that our kids have enough money for the future, is usually a parents’ number one priority. Things change, we lose our jobs, we don’t know what the future holds, but when we know that our children are taken care of, there is nothing that we cannot survive. It is said that you should start putting money on the side as soon as your kids are born so that when they reach a certain age, you can give them the funds, and provide them with things that will make their lives easier.
Custodial accounts, by definition, are accounts that allow people who are under the legal age to own investments before they reach a certain age. In most countries, this age is 18, while in others it can vary between 16 and 21. In this article, we are going to give you more information on how to open a custodial account in just a few easy steps, and we will help you better understand this process, and how you and your children can benefit from it.
1. Start by doing your research
The first thing you need to do is do your research. You probably know enough about these types of accounts if you are interested in them, but you can always know more. Know that there are two main types of these accounts, and they are Uniform Transfers to Minors Act (UTMA) and Uniform Gift to Minors Act (UGMA). In the former, you can store property and real estate, and in the latter, you can store financial assets including stocks.
Make sure that you find a reliable company that will allow you to store the assets, and know that you can easily get an appointment with their representatives so that they can tell you more about the things they offer, and what would the best choice for you be. Depending on what you want to store, how many people do you want to be the beneficiaries, and how much money or stocks you plan on putting in every year, they will give you more information and advise you on how to proceed.
According to Loved.com, the right service can help you invest in your children’s future, and they will help you learn more about the benefits and the drawbacks of these accounts. Take your time to do the research needed, and know that you can always change your mind.
2. Gather all the documents
When you have an idea about where you want to start this process, you will need to gather all the documents needed. In most cases, you will just need the name of your child or children, their birthday, and their social security number.
Know that when you set the account up, you will be able to choose the actions you want to take, where you want to invest, and make changes. In some cases, you can add more beneficiaries, but you will need to talk to the company you want to cooperate with about the exact details of this process.
3. Get the minimum deposit
The next thing you need to think about is the minimum deposit. This number varies on several things, and it mostly varies on the provider you choose and the interest rate. It is said that the bigger the interest rate is, the larger the minimum deposit needs to be.
Know that with some providers, you won’t need to invest more than a few dollars, which with others, you may need to make an initial investment of thousands or even more dollars. Talk to the representative, and think about your current situation and plans for the future before you choose how much you want to initially deposit. Know that the initial deposit is different from all the other savings you are going to make in the future, and later on, you should be able to put as much or as little as you want.
4- Learn the tax rules
One of the biggest reasons why people choose custodial accounts is because you won’t be required to pay taxes for this account. As you already know, when it comes to traditional savings, you are required to pay fees to the state for your money.
Since these accounts are seed as gift savings, there is a sum that you can put in every year without having to pay anything for it. It is said that depending on your state’s laws, and the place where you live, you can save between 14 and 28 thousand dollars every year and avoid paying taxes for them. Know that the number varies depending on your location, so always talk to the provider’s representative to make sure you know the exact amount.
5. Just follow the steps
Know that depending on the provider or the app you choose, you won’t need to bother a lot with opening this savings account, and the whole process won’t take you more than 30 minutes. You just need to follow the steps that are suggested by the provider or the app. In most cases, you can easily reach out to customer support if you need any help with the setting up process. If you don’t understand anything, or if things look too complicated, you can just have a meeting with the representative and ask them to help you with the process.
Most of the platforms available nowadays will give you step by step instructions, and the only thing you need to do is follow those instructions and add the details needed. Take your time, and know you can go back to any part of the process.
Custodial accounts are a great way to invest in your children’s future, and you should open up one as soon as you can. No matter if you want to save several hundred or several thousand dollars a year, you will be putting all that money, stocks, and real estate into your kids’ future. Consider all of your options, look for the right platform, and know that you can always consult with a financial advisor in case you have any questions, or if you don’t know if this is the right step for you.