Custodial accounts are often used as a way for parents or relatives to set aside money for a child’s future or make it easier to transfer generational wealth. Understanding custodial accounts is essential for anyone looking to secure a child’s financial future or efficiently transfer generational wealth, making it a pivotal topic for financial planning and long-term stability. Custodial accounts serve as a powerful tool in building a solid financial foundation for the next generation.

In this article, we’ll cover:

• How custodial accounts work
• Types of custodial accounts
• Benefits of custodial accounts
• Disadvantages of custodial accounts

How do custodial accounts work?

Custodial accounts allow an adult to open an investment account on behalf of a child and add money and other assets to it. This allows the adult to transfer assets to a minor without the cost and complexity of establishing a formal trust. While parents or other relatives commonly open custodial accounts for children, any adult is allowed to open one for a minor beneficiary.  

Once it’s set up, a custodial account works just like any other type of brokerage account. The custodian can add money and manage the investments; they can even take money out of the account as long as the funds are used for the minor’s benefit. 

Income from a custodial account is taxable, just like income would be from an adult’s brokerage account. If the account generates taxable income, the custodian is usually responsible for filing a tax return on behalf of the child and paying any taxes owed. The custodian may be able to report a custodial account’s taxable income on their own tax return instead if they meet certain conditions defined by the IRS.  

Though the custodian makes the decisions about how to invest the money, the assets in the account belong solely to the beneficiary. The beneficiary cannot withdraw any of the funds until they reach the age of legal adulthood, also called age of majority, which varies from 18 to 25 depending on the state and type of custodial account. At the age of majority, the beneficiary takes control of the assets. 

Contribution limits and tax treatment in 2023

When it comes to contributing to custodial accounts, you have a good amount of freedom – there are no strict limits on how much you can put in and contribute. That said, contributions may trigger a gift tax if they exceed $17,000 for an individual or $34,000 for a married couple.

It’s important to keep in mind that contributions to custodial accounts are not tax-deductible, which means that they don’t provide immediate tax benefits. Additionally, unlike some other investment vehicles, custodial accounts do not offer tax-free growth.

That said, there can be some tax advantages with a custodial account. Because all the assets in the account are the legal property of the young beneficiary, a portion of the income generated by the account is either untaxed or taxed at the minor’s tax rate (kiddie tax rate). This “kiddie tax rate” is nearly always lower than an adult’s rate and can lead to potential tax savings.

As of 2023, the rules state that the first $1,250 of unearned income is untaxed, the next $1,250 is taxed at the child’s rate, and anything over $2,500 is taxed at the parent’s marginal rate.

Investment options

Custodial accounts can invest in a variety of assets, though the specifics vary by account type. Generally, investment options for custodial accounts include stocks, bonds, mutual funds, cash, and other financial assets. UTMA custodial accounts, discussed below, allow for a wider array of investments. 

Types of custodial accounts

There are two main types of custodial accounts: Uniform Gifts to Minors Act (UGMA) accounts and Uniform Transfers to Minors Act (UTMA) accounts. Both types of investment accounts were established by federal laws that states can choose to adopt if they wish. While all states have done so, many have made modifications to the legislation and the specific rules governing the accounts. Custodians will need to understand the details of their specific state’s UGMA and UTMA implementation before making any investment decisions.

Both types of custodial accounts function in the same way. The main difference is the assets that can be held in the accounts. 

UGMA account

Uniform Gifts to Minors Act (UGMA) accounts are a bit more restrictive than UTMA accounts, which we’ll cover next, in terms of what types of investments they can hold. A UGMA account can only hold financial products such as:

• Stocks: Ownership in companies, which can offer the potential for high returns but also come with higher risk.
• Bonds: Loans to governments or companies, providing regular interest payments and eventual repayment.
• Mutual Funds: Professionally managed collections of different investments, offering instant diversification.
• Cash: Money market funds or cash equivalents, which are safer but typically provide lower returns.
• Certificates of Deposit (CDs): Time-bound savings accounts with fixed interest rates and maturity dates.

UTMA account

Uniform Transfers to Minors Act (UTMA) accounts are even more flexible than Uniform Gifts to Minors Act (UGMA) accounts. With UTMA, you can invest in things like real estate, artwork, collectibles, and even things like patents and royalties. This is great for passing down a wider range of assets to a minor.

One of the unique features of UTMA accounts is their handling of gifted assets, such as bonds, that have maturity dates extending beyond the minor’s age of majority. 

For example, let’s say someone gifts bonds to a UTMA account for a child. If these bonds have maturity dates that go beyond the age at which the minor gains control over the account, these bonds don’t automatically become accessible once the minor reaches adulthood. Instead, these bonds or other time-bound investments can keep growing until they reach their maturity dates.

This feature can be pretty helpful for managing investments with longer timelines. So, if you’re considering UTMA accounts, remember that they can offer this unique advantage of letting certain investments reach their full potential, regardless of the minor’s age.

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Benefits of custodial accounts

Custodial accounts are incredibly flexible and much simpler than establishing a trust fund. There are no withdrawal penalties and no limitations on contributions or income. While any funds the custodian withdraws are required to be used for the benefit of the child, the parameters can be vague; that money might be used for clothing or living expenses, as long as the beneficiary receives the benefit.

• Simpler to establish than a trust fund: Trust funds involve legal intricacies and administrative costs that custodial accounts typically avoid. This simplicity makes custodial accounts accessible to a broader range of individuals.
• Lots of investment options: A wide range of investment choices allows you to align the investment strategy with the minor’s financial goals and your preferences.
• No withdrawal penalties: Custodial accounts don’t impose penalties for withdrawing funds. This means you can access the money when needed without worrying about extra charges.
• No income or contribution limits: Without income or contribution limits, you have the freedom to invest as much as you’d like to support the child’s future financial needs. Just keep gift tax in mind.
• Up to $2,500 taxed at a lower rate: A portion of the income generated within custodial accounts is often taxed at the minor’s usually lower tax rate. 
• Flexibility in using funds for child’s benefit: The money can be used for various purposes that contribute to the child’s well-being, such as education, clothing, living expenses, or even extracurricular activities.

Disadvantages of custodial accounts

One of the main disadvantages of custodial accounts is that because they count as an asset for the beneficiary, they can affect a child’s ability to receive college financial aid and potentially reduce the amount of assistance for which they’re eligible. Additionally, once a beneficiary is established, the account cannot be transferred to another beneficiary. Gifts or deposits made to the account are irrevocable; they become the property of the beneficiary forever. 

• Could affect financial aid eligibility: When applying for financial aid, the value of the custodial account is considered as part of the child’s assets. Having a substantial custodial account can reduce the amount of aid the child is eligible for.
• No change in beneficiaries: Once a beneficiary is established for a custodial account, it’s not possible to change it.
• Gifts/deposits are irrevocable: Once the funds are transferred, they become the property of the beneficiary, and the custodian no longer has control over them. This means that the custodian cannot take the money back for their own use or redirect it to a different purpose. 

Investing in your family’s future

Whether opening a custodial account is a good idea depends on your circumstances and goals. Many parents, for example, find that a custodial account can be an effective way to invest money on their child’s behalf to get a head start on saving for things like college. Some people also see a benefit in passing down wealth without the hassles of creating a trust fund. As you explore investment opportunities for your family, you may find that a custodial account makes sense for you. It’s never too early to start saving, and you open a custodial account to get a head start on securing your child’s future.

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Custodial account FAQ

1. Are there different types of custodial accounts?

Yes, there are two types of custodial accounts; depending on the state you live in, the account may fall under one of two legal frameworks:

• Uniform Gifts to Minors Act (UGMA), which can contain only financial assets, like stocks, bonds, and insurance products
• Uniform Transfers to Minors Act (UTMA), which allows investments in more types of assets, like real estate

In most states, only one type of custodial account is allowed. Stash offers custodial accounts of both types, so you can choose whichever is allowed by applicable law in your state.

2. Who can open a custodial account?

Opening a custodial account isn’t limited to biological parents; it’s a flexible way for any caring adult to contribute to a child’s financial journey and set them up for a secure future. Any adult–grandparent, aunt, uncle, godparent, chosen family member, supportive teacher or mentor, and so on—can open one. To be clear, the adult who opens the account is the custodian of the account, not necessarily the child’s custodian.

The custodian will need some information to open the account, including the child’s full name, date of birth, and social security number.

3. Do custodial accounts impact taxes or financial aid?

They might. If you plan to open a custodial account, you may want to learn more about the tax implications and the potential impact on the child’s ability to get financial aid for college. Learn how you can best save for college without impacting financial aid.

The post What Is a Custodial Account? appeared first on Stash Learn.

One thing to keep in mind: Investment accounts are not the same as savings accounts at a bank. The assets in any investment account could grow significantly over time, but investing always involves risk, including the risk that you could lose money.

In this article, we’ll cover:

• Brokerage accounts
• Individual retirement accounts
• Employer-sponsored retirement accounts
• Custodial accounts
• Education savings accounts

Brokerage accounts

When people say “brokerage account,” they usually mean a highly flexible investment account that allows you to choose from many types of investments, trade the securities you want to own and withdraw money whenever you wish. Here’s an overview of how they work:

• A brokerage firm, or broker/dealer, is a company offering financial services; you open your account with the brokerage, and they execute trades on your behalf. Brokerage firms come in many forms, from brick-and-mortar in-person service online-only platforms or apps. Your brokerage may offer other services too, like an online robo-advisor or financial advising.  
• A broker is a licensed professional who can trade on your behalf. They work for a brokerage firm and typically charge a commission or other fees for helping to manage your money. You might not necessarily work with an individual broker at your brokerage firm; it’s common for people to use a robo-advisor or manage their investments themselves at online and app-based brokerages.
• A brokerage account is the individual investment account you open with a brokerage firm. You put money into your account, and the brokerage invests it as you wish. If you want to buy or sell any securities, you request the trade and the brokerage enacts it.  If your account earns profits, dividends, or interest, you’ll likely owe taxes on that money 

A point of clarification: almost every type of investment account is held by a brokerage firm, even accounts with more restrictions, like an IRA or a custodial account. That’s because only brokers can interface directly with the stock market. They enable individual and institutional investors to buy and sell securities, like stocks, bonds, exchange traded funds (ETFs), mutual funds, and more. You interact with the brokerage, and the brokerage trades on the stock market on your behalf.

Cash account

Cash brokerage accounts are funded with your money: if you deposit $100, you can invest up to $100. In many cases, you can get started with just a few dollars. You can invest in whatever securities your brokerage offers; in addition to stocks, bonds, and funds, some brokerages offer access to commodities like gold and newer investment vehicles like cryptocurrency. 

Margin account

With a margin account, you can invest your own money, as well as borrow money from your broker to buy securities. You must pay back the loan, plus interest, even if your investments lose value. In some cases, the brokerage can force you to sell your investments to cover your debt. Margin accounts usually represent a significant risk to investors. 

>> Learn more about brokerage accounts 

Individual retirement accounts

Individual retirement accounts (IRAs) are tax-advantaged accounts that help people save for retirement. You can invest your contributions in almost any security, and investment returns grow tax-deferred while they remain in your account. There is typically a penalty for money taken out before age 59½, but there are a few exceptions. There are two main types of IRAs: traditional and Roth. 

>>Learn more about IRAs

Traditional IRA

With a traditional IRA, your contributions may be tax-deductible. This can reduce your taxable income, which might lower your overall tax bill in any given year. Any investment returns accrue tax-deferred and at 59½, you can begin making withdrawals. You’ll typically owe tax on the money you take out. If your tax rate is lower when you withdraw than it was when you contributed, you might reap tax savings. 

If you take out money before age 59½, you’ll have to pay an extra penalty tax unless you qualify for an exception. And when you turn 70½, you’re required to start taking distributions; you’ll owe additional tax if you don’t.

>>Learn more about traditional IRAs

Roth IRA

Unlike traditional IRAs, Roth IRAs are funded with after-tax dollars. Qualified distributions made after you turn 59½, however, are tax-free. That means any money you earn on your investments is also tax-free. If you expect to be in a lower tax bracket earlier in your career and a higher tax bracket close to retirement, a Roth IRA could help you save on taxes. Roth IRAs can also provide more flexibility when it’s time to withdraw, as you may be able to take out your principal investment without penalty prior to age 59 ½, and there are no required minimum distributions like traditional IRAs impose.  

>>Learn more about Roth IRAs

Employer-sponsored retirement accounts

There are a few types of investment accounts offered by employers to help their employees with retirement savings. They typically offer tax advantages, and employers often make a matching contribution on your behalf. These retirement accounts usually have higher contribution limits than IRAs, but investment options tend to be much more limited.

>>Learn more about employer-sponsored retirement accounts. 

401K

A 401(k) plan is a retirement account that can be offered by private companies. Employees commonly contribute with pretax dollars, lowering their taxable income, though Roth and after-tax contribution options may also be available Employers may match employee contributions up to a certain amount, so many employees contribute at least enough to get the employer match. In many cases, these plans have a “vesting” schedule, meaning that employees do not fully own the employer’s contributions until they have worked there for a certain amount of time. 

Money in the account contributed on a pre-tax basis, including any investment returns, is not taxed until it’s withdrawn. If you expect to be in a lower tax bracket when you retire, you might save money on taxes. Funds withdrawn before age 59½ are subject to an extra penalty tax in most cases. Like traditional IRAs, 401(k) plans have required minimum distributions.

Roth 401K

Roth 401(k)s have different tax advantages than standard 401(k)s. Like a Roth IRA, contributions to a Roth 401(k) are made with post-tax dollars, but qualified distributions are tax-free, including investment returns. If you expect to be in a higher tax bracket when you retire, a Roth 401(k) could offer substantial tax savings.

403(b)

Only private employers can offer 401(k) plans. Nonprofits and some government employers can offer a similar plan: the 403(b). 403(b) plans are also called tax-sheltered annuities.

Like 401(k)s, 403(b) plans allow you to make contributions of pre-tax money, and employers often offer matching contributions. You can generally take qualified distributions after age 59½, and will owe taxes on your money at that time; nonqualified distributions come with a 10% penalty. 403(b) accounts also have required minimum distributions.

Custodial accounts: investment accounts for kids

A custodial account is a type of investment account for a child. A parent or other adult is the custodian; this person makes investment decisions and often funds the account. The assets in the account belong solely to the child, but the child cannot withdraw money until they reach the age of majority, which varies from state to state. Nevertheless, the account may be considered the child’s asset in financial aid calculations, potentially limiting the aid available to them. Additionally, any income from a child’s custodial account belongs to the child, so if income exceeds a certain threshold, you’ll need to file a separate federal income tax return for the child. The custodian, however, can use the money for the child’s benefit. 

>>Learn more about custodial accounts 

Uniform Gifts to Minors Act (UGMA)

UGMA accounts are custodial investment accounts that allow an adult to transfer assets to a child without establishing a formal trust. The account can contain stocks, bonds, and other securities. It’s managed by the custodian until the beneficiary reaches the age of majority; at that point, the beneficiary can use the money without restriction. Before that, the custodian can use the money for the child’s benefit. UGMA accounts will likely be treated as the child’s asset for purposes of financial aid, which might lower the amount of aid available. 

While UGMA investment returns are not tax-free, in some cases they are taxed at the minor’s tax rate, or the “kiddie tax,” which may be lower than the custodian’s. Contributions are made with post-tax dollars, but individuals can contribute up to $16,000, and married couples up to $32,000 per year, without triggering gift tax.

Note: UGMA is a federal law that states can adopt. While all states have done so, some have made amendments. You’ll want to learn the details of your state’s UGMA implementation before making investment decisions. 

Uniform Transfers to Minors Act (UTMA)

UTMA largely aligns with UGMA: it allows adults to open a custodial account to transfer assets to children without establishing a trust, requires a custodian, may impact the child’s access to financial aid, and passes to the child without restriction at the age of majority. But UTMA extends UGMA to allow investments in more asset types, including real estate, paintings, patents, and royalties. UTMA also allows some flexibility for gifted assets to reach maturity dates, like bonds, even after the minor comes of age. 

UTMA is another federal law that states can choose to adopt. Most have adopted it, but not all, and some have amended it. It’s important to understand your state’s UTMA before making investment decisions. 

Custodial IRAs

Any individual can contribute to an IRA if they have earned income. Thus, children with earned income can fund IRAs to get a head start on retirement planning. Other people can contribute on the child’s behalf, as long as the total does not exceed the child’s earned income. A child’s IRA, however, must be set up as a custodial account.

Custodial IRAs can be traditional or Roth, and the contribution tax rules are the same as adult IRAs. For children, Roth IRAs can be especially attractive because contributions are made with post-tax dollars, at a time when a child’s tax rate is likely low. Then any investment returns grow tax-free, and any qualified distribution is also tax-free.

Investment accounts for education

The funds in UTMA and UGMA custodial accounts can be used for any purpose, though people often use those types of investment accounts to save for education. However, there are certain custodial investment accounts specifically designed for educational expenses: 529 college savings plans and education savings accounts (ESAs). These accounts offer special tax advantages, but they feature more restrictions on how the money can be used.

529 college savings plan

A 529 plan is a savings and investment account for college, K-12 education, and some apprenticeship programs. The most common type is the college savings plan; contributions can grow tax-free and be withdrawn tax-free for qualified educational expenses. The 529 prepaid plan, in contrast, allows adults to prepay in-state public tuition in hopes of locking in a lower rate. 529 plans are usually operated by states and can vary significantly from state to state. 

Education savings account (ESA)

An ESA, sometimes called a Coverdell education savings account, is another type of investment account for educational expenses; the beneficiary must be under 18 or be considered “special needs.” The funds can be used for college or K-12 expenses. Contributions are made post-tax, but assets can grow tax-free, and distributions for qualified educational expenses are tax-free. Withdrawals made after the beneficiary turns 30 will incur penalties and taxes.

Finding the right type of investment account for you

With so many types of investment accounts, it might seem daunting to decide which kind you want. They all have different levels of flexibility, potential tax advantages, and limitations. So it’s all about lining up your goals with the type of investment account that best supports them.

The good news is, that you don’t have to choose just one way to invest. It’s not uncommon for people to have one or more retirement accounts to take advantage of tax benefits, a brokerage account to grow money at a faster pace than inflation, and an account to save for their kids’ education. Investing can be a way to build wealth for the future, whatever your goals; with all the types of investment accounts out there, you can find the right approach for the future you want to build. 

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One option to teach teens how to invest early is to set up a custodial account for them.

Custodial accounts for teens

A custodial account is a type of investment account for children and teens under the age of 18. This account type is managed by either a parent or other adult close to the minor and allows them to trade a range of investment types, including stocks and ETFs, that benefit the child. When the minor reaches the age of adulthood, the account ownership is then transferred to the newly young adult.

Many investment banks and traditional banks offer custodial accounts for parents interested in saving for college or other expenses that can benefit their kids. Institutions that offer these accounts often create educational content too, which can help enterprising investors to learn more about the world of finance.

Involving teens in their investments

Involving teens in the management of their custodial accounts can teach them to manage a portfolio from an early age. While this account is technically managed by parents or guardians, allowing young investors some control over their investment portfolio can spur an interest in finance, and give them valuable experience in managing their finances.

Custodial accounts can also help young investors understand the economic and financial basics of the market. For example, sitting down with your children to discuss the S&P 500 and discuss investment strategies can help build responsibility and trust, too.

One upside to starting early is the potential growth* a portfolio can experience over time, thanks to compound interest.

Rules for custodial accounts (UGMA/UTMA)

Custodial accounts may have specific guidelines determined by your bank, but there are some general rules that you should keep in mind:

• Custodial accounts are for kids. The money belongs to them as soon as you open the account, and custodians hand over the reins when a child reaches adulthood, which is typically between 18 and 21 years of age, depending on state law.
• The funds must benefit the child. Funds in a custodial account must go toward purchases for the child, and can’t be used for your own personal expenses.
• Beneficiaries can use the money as they see. Once a child gains control of the account, they can use the money for anything they want.
• Taxes. Generally speaking, you’ll need to pay taxes on the income accrued by a custodial account if the amount exceeds $2,200. However, many parents and guardians use these accounts linked to their children for the purpose of gifting them tax-exempt* money up to $16,000.

*For additional questions regarding Tax treatment, please consult a Tax professional

Teach young people about money

Learning about investing can teach your teen important lessons about money and personal finance while helping them learn some mistakes to avoid along the way. These lessons include how to use investing tools, and how to access or reference educational material pertaining to their assets.

Financial education allows your teen to become more intentional with their money and to know when and how to successfully tackle long-term financial goals.

The post How to Help Teenagers Start Investing Early appeared first on Stash Learn.

In fact, kids start to understand the basics of how money works when they’re just three years old, according to some experts. And when they’re seven, a lot of the financial habits they’ll have for the rest of their lives are set. So the earlier you’re able to teach your kids about investing their money and the stock market, the better their financial habits are likely to be as adults. 

Investing is a way to put your money to work in a diverse portfolio of stocks, bonds, and ETFs, with the objective of seeing your money grow over time. But when your kids are interested in the next new video game or toy, it can be hard to get them interested in saving and investing their allowance or babysitting money in the market. 

With that in mind, Stash has put together these resources to help teach your kids about investing and to help you get started as a family:

The post Stash’s Guide to Teaching Your Kids About Investing appeared first on Stash Learn.

Depending on your goals, college savings plan, trust accounts, and even Roth IRAs can be highly effective for building the foundation of a child’s financial future. These accounts provide parents with specialized tools for investing on behalf of your children. A custodial account, meanwhile, is a simple and flexible way to save for a wide variety of near- and long-term goals for your kids.

What is a custodial account?¹

A custodial account is an investment account established in the name of a minor by an adult custodian. This custodian makes decisions regarding the assets in the account until the child is old enough to assume full control. You might see these accounts referred to by the laws that established them—the Uniform Transfer of Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA).

When the custodian makes contributions to the account, the contributions belong fully to the child and cannot be retrieved. Otherwise, the custodian has complete control over the assets.They can determine how the money is invested and when it can be withdrawn. When the child reaches adulthood at age 18 or 21—also known as the age of majority—they take on these responsibilities for themselves.

Custodial accounts will typically be limited to a safe, low-return range of investments such as certificates of deposit or money market funds. A brokerage or mutual fund firm will grant you access to a wider variety of investment vehicles in a custodial account. These can include stocks, bonds, mutual funds and exchange-traded funds (ETFs).

State laws will vary with regard to a minor’s age of majority, the tax consequences of custodial assets and limitations on how much money you can add to an account annually, among other factors. Consult with your financial institution to familiarize yourself with these laws before opening an account. Federal tax rules, especially gift tax limitation, can come into play when you give money to your child’s account.

What are the benefits of a custodial account?

The benefits of custodial accounts are varied. First, they are easy to open. They are also flexible, and the assets can be put to any purpose that benefits the child, unlike 529 plans for example, which must be used for strictly educational purposes.

With some limitations and exceptions, gains on the assets held in custodial accounts are taxed at  the child’s income level rather than the custodian’s, which can mean significant tax savings. Remember UTMAs and UGMAs vary from state to state, and you should do your homework regarding your state’s custodial tax rules. 

Upon reaching the age of majority, your newly minted adult will be free to assume full control over the account and continue investing the funds or withdraw them for whatever purpose.

Are you financially ready to open a custodial account?

A crucial question to ask before making any investment is whether or not you are financially ready to do so. Just as you should ask yourself whether a particular investment suits your long-term financial plans, take the time to consider whether an irrevocable gift to a minor— a custodial account—aligns with your goals. Will such a gift hamper your ability to meet your own objectives? If so, you might not want to open one at this time.

What are your goals for the account?

If you are ready to open  a custodial account, consider goals for your child and how a custodial account can  achieve them. For most families, college education looms as the number one long-term financial goal. Remember that an education-specific account like a prepaid tuition or education savings plan may make sense if secondary education is your sole focus for your child.

Tuition may not be your only goal, however. A custodial account grants you and your child the freedom to use your custodial assets for a wide range of purposes, such as extracurricular sports, art classes or musical instruction. If your child needs a laptop or a guitar to pursue these interests, a custodial account is one way to save for such an expense. Just be sure to plan ahead for larger expenses such as a car or summer camp, if you want to draw from the custodial account for those big-ticket items.

How to open a custodial account

Opening a custodial account is similar to opening a standard bank or investment account. Since the minor is technically the owner of the account, you will need their social security number and other personal information. As the custodian you will receive any future communication about the account once it’s open.

When considering what type of custodial account to open, first identify your goals. Are you saving for the near-term, or for long-term goals like college or retirement? A custodial savings account makes for easier deposits and withdrawals at local bank branches, and provides easy access to funds in the short-term should you need them.² A brokerage account can offer access to a wider range of investment opportunities to help you target long-term savings goals. But invested funds are less liquid and harder to access should you need them on short notice.

Taking advantage of a teaching opportunity

Many kids lack a basic understanding about money, how saving and investing works, and how to stick to a budget. Opening a custodial account can provide an opportunity to educate your child and lay the groundwork for achieving future goals. You can teach your child what it means to set aside a small amount of money for investments every month or year, or how to evaluate investment options and interest rates, and track the performance of those investments over time. 

Teaching them the importance of compound interest and how it can boost savings over time, and demonstrating how to budget can help them achieve long-term objectives. By opening a custodial account for your child, you can take the first step toward developing that knowledge, setting them on the path to lifelong financial awareness and potential success.     With Stash+($9/month), you can open two custodial accounts¹ with a minimum deposit of only $1.00.³ Stash Learn can also help you teach your kids about the basics of budgeting, saving, and investing.

The post Why You May Want to Start Investing for Your Kids Now appeared first on Stash Learn.

Financial literacy is strongly linked to positive financial outcomes, according to a recent study by the Financial Industry Regulatory’s (FINRA) Investor Education Foundation. But many children don’t receive a financial education at all. Instead, they learn about earning money, saving, investing and spending from their own experiences.

Lack of financial literacy education in schools means that many parents must take matters into their own hands. Taking the initiative to teach your kids about money can better prepare them for the financial realities they’ll face as adults.

When should you start talking to your kids about money?

It’s never too early to start teaching children about money. In fact, they’ll likely pick up on your cues whether you set out to teach them or not—so start setting a good example early.

Kids are good at noticing how you feel, so consider what emotions you want to project around money. If you experience a lot of anxiety around money, they’ll notice, and they’ll make that association. If you approach money matters calmly and confidently, they’ll pick up on that, too, and hopefully use the same approach as they get older.

The words you use to talk about money also matter. For example, avoid using words like “broke.” Instead of saying you “can’t afford” something, try saying, it’s “not in our budget.”

Direct money lessons can be taught even to young children. Use coins to help them learn the value of money and different ways to count it. If you take your child with you to the grocery store, tell them how much each item costs as you put it in the cart. Or consider recreating a shopping experience at home, using coins and household items.

How to introduce kids to saving

A piggy bank is a classic first tool for saving, but your child may learn more effectively if they divide their savings according to a few simple categories. Give this a try: help them label four different jars with Needs, Wants, Goals and Causes. When they receive money for their birthday or from an allowance, encourage them to divide it among the four jars, considering which among them are most important.

This method is a great way to teach your kids the difference between wants and needs. For a child, a Want might be candy or a toy, while a Need might be something necessary for school or a sport. The Goals jar, meanwhile, is for things they want months or even years in the future, such as a new bike. And the Causes jar encourages children to set aside money for gifts, or for a charity of their choosing.

Conversations around the dinner table are another great way to start teaching your kids about saving. Even if it’s just once a year—during Thanksgiving weekend, for example—try having a discussion with the entire family about savings goals for the following weeks, months, and years. This is also a good time to discuss any charitable gifts you’re planning to make. Including your children in this conversation will demonstrate the value of planning and giving, and help them feel involved in the family decision-making process.

How to teach your kids about earning money

Teaching your kids about chores can help give them a sense of responsibility, pride, and self-confidence. Depending on their ages, kids can  do dishes, take out the trash, vacuum, mow the lawn, and help out with many other household upkeep activities. Consider creating a weekly chore chart to help your kids understand which chores are expected of them.

When you tie an allowance to these chores, you can teach your kids a valuable lesson about earning money. In most cases, children don’t see their parents working all day, so it can be easy for them to imagine that money is a resource that has no connection to any particular activity. Teach them that money comes from work, and treat their allowance as payment for the chores they do each week.

You might also consider giving your kids extra allowance money if they practice good savings habits consistently. This practice can help reinforce the value of saving.

Establishing money management

You can introduce young children to money and debt management by teaching them how to create a budget. One way to do this is to budget for an activity to do together, like a picnic. Explain to your child that you have a set amount of money to spend on the picnic and create a list of all the items you want to buy. This will help teach your child that you might not be able to afford everything you want under the budget you’ve set, and to prioritize certain items above others.

When your children are older, you can start including them in family budget discussions. This is an excellent setting for children to start learning about the various recurring bills you pay, and the money you set aside for regular expenses like food and gas.

Preparing for the long-term with a custodial account

Consider setting up a custodial account for your kids to help them save and invest while earning interest. All transactions will have to be approved by you, so your child can’t make investment decisions or withdraw money without your go-ahead. Take this opportunity to introduce your child to the concept of compound interest and its power to help them build wealth over time. Note: When children reach the age of majority, they get full legal control of the custodial account. The age of majority can vary by state.

With Stash+¹, you can open two custodial accounts for your kids², with a minimum deposit of only $1.00. You can use Stash to show your kids how to save for their goals and invest their money.³

How to set up a custodial account with Stash

If you’re ready to teach your child more about saving and investing, consider opening a Stash custodial account. Choose how much you want to invest, starting with as little as $5, and simplify investing by making automatic contributions.

The post Here’s How to Teach Your Kids About Money appeared first on Stash Learn.

Financial literacy at a young age may correlate with higher net worth in your 20s and beyond, according to a study by the research organization Brookings Institute.

Understanding the stock market is a key element of financial literacy. Yet, it can be intimidating. The key may be to break down complex topics into simpler ideas that your children can understand. Slowly introduce the concepts as your child grows up. You will be giving them a powerful tool for building long-term wealth and setting them up for adulthood.

How to introduce the idea of saving

You can start exposing your child to foundational concepts by introducing them to the principle of saving. Make the process hands-on and visual by having your child save in jars so they can watch their savings accumulate over time.

Teach your kids to save with purpose by dividing their savings into four jars labeled wants, needs, causes and goals. Ask them to name which of these categories are most important to them and have them save extra in the jars that matter most.

You might also take your child with you when it’s time to make a purchase. Demonstrate how money is exchanged for goods and services, and show them how to compare the cost of one thing to another. Explain that a little bit of money can turn into a lot of money over time when they save.

How to explain stock basics

When your children are old enough, you may be able to introduce the idea of owning stocks. They’re probably already familiar with publicly traded companies that make the products they may already use, such as Mattel, Kellogg’s, Nintendo, Disney or Apple. 

You can teach your kids that when people buy stock, they actually buy a small portion of companies like these, and when they perform well, the stock becomes more valuable. When companies do poorly, stock value declines. And when you sell a stock whose value has increased, you make a profit. And when a company underperforms, the stock’s value can fall. Selling the stock at that point would mean they lose money.

There are a number of games available that can help kids learn how the stock market works. The Securities Industry and Financial Markets Association (SIFMA) offers The Stock Market Game free to elementary school aged kids. The game gives them the chance to manage an imaginary $100,000 portfolio online.

Middle school and high school aged kids may explore similar themes with the free game How the Market Works and the Personal Finance Lab’s Stock Market Game, which costs $15.

As your child begins to learn more complicated math, they may be ready to wrap their heads around more abstract ideas related to investing. For example, if they’ve started learning about fractions, you can explain the concept of compounding—the return earned on your principle, plus your past returns. Demonstrate this concept by having them multiply $10 by 1.25. Then have them multiply the product by 1.25 again and again, watching the number grow by greater and greater leaps each time. Tie this into the way that investments can grow inside an investment account, and explain how the earlier you start investing, the longer you are able to take advantage of this benefit.

Explaining why people—and kids—may choose to invest

As you’re teaching your kids how the stock market works, try talking to them about why people invest in the first place. Explain that investing can be a powerful way to create wealth over the long term that helps people save for goals, such as going to college, buying a house or retiring from work.

Over the long term, average stock market returns can be much higher than the interest your money earns in a savings account, so it can be a way for people to build wealth fast enough to achieve these big goals.

Explain that another reason people invest is to overcome inflation. Over time, the prices of goods and services tend to go up, and the value of money tends to decrease. Use a practical example: Almost 90 years ago, a nickel could get you a 12-ounce bottle of Pepsi. Ask your kids to think of something they could buy for a nickel today. If your child simply kept their money in a jar at home, over time it would be worth less and less. However, if they invest that money, the potential gains they could make could help their savings increase in value over time, instead of decrease.

Opening a custodial account for your kids

To give your child a more in-depth experience of buying and selling stocks, consider opening a custodial brokerage account for them.¹ With a custodial account, you can make monetary gifts and retain control of investments and withdrawals until your child reaches adulthood at age 18 or 21, depending on the state in which you live.  When you subscribe to Stash+ ($9/month), you can open two custodial accounts with a minimum deposit of only $1.00.² 

Unlike other savings accounts for children, such as 529 plans for college education, custodial accounts offer flexibility in how they are used once your child is an adult. They could use the money to fund education, but also to buy a new car, travel the world, or open a business.

You can use the custodial account as an educational opportunity to help your child learn to make investment decisions. Help them identify individual stocks of companies they’re interested in—owning a piece of the company behind their favorite toys or movies may help fuel an enthusiasm for investing. Consider picking out some index funds or low-cost ETFs on their behalf, explaining the benefits of diversification. Think about balancing helping them follow their own interests and developing a healthy long-term investment strategy that has the potential to gain value.

Developing an understanding of the stock market can demystify investing and can put a powerful wealth-building tool in your children’s hands. Introducing age-appropriate concepts to your children prepares them to be responsible investors and gives them a leg up on their peers. Best of all,  it can be easy to make the learning process fun and engaging when you help them invest in the stocks of companies they love.

The post How You Can Start Explaining the Stock Market to Your Kids appeared first on Stash Learn.

Unfortunately, by the time most of us truly understand this advice, we’re already well into adulthood, having missed out on a decade or two in which we could have been putting money away. Luckily, parents can give their kids a head start by investing on their behalf.

By opening a savings or investment account for your child early on, you can help them grow a nest-egg that can later be used for important milestones such as paying for college tuition, or a down payment on a first home.

When your child is old enough to take an interest in personal finance, you can use those accounts as teaching tools to help them understand investing. Doing so can encourage them to contribute on their own once they’re old enough to earn money, and can help foster healthy financial habits.

What kinds of investment accounts can I open for my kids?

There are a number of different ways to start investing on your children’s behalf. You can choose which type of account may be best for you and your family, depending on your saving and investing goals:

• Tax-advantaged education accounts: Both Coverdell education savings accounts (ESAs) and 529 plans allow you to invest money to be used exclusively for tuition and other education-related expenses in the future. Tax advantages and contribution limits vary. But for parents concerned about paying for college, these plans can offer a way to stay focused on saving for education.

• Custodial Individual Retirement Account: If your child has earned income, you can help them invest it in a custodial IRA. You may open either a traditional or Roth IRA. As the custodian, you manage the assets for your child until they reach age 18, or 21 in some states.

• Custodial brokerage account¹: To give your kids the experience of investing themselves and  learning about the market, you can open up a custodial brokerage account. These accounts are made possible through the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), and are often known by those names. The availability of either account will depend on the state in which you reside. Through a custodial brokerage account, you can include your child in decisions about basic investing. While they can weigh in with their thoughts, you ultimately have control of the account until they come of age.  

Why it’s important to invest for your children’s future

Giving your kids a leg up toward financial stability can go a long way toward helping them achieve their goals, whether that means attending a top university or traveling the world.

Starting to invest early allows you and your child to take advantage of compound interest— the returns earned on your principal, plus your past returns, which can help build savings faster.   The longer your child is able to invest, the greater their exposure to compounding will be, which may make it more likely for them to  reach their financial goals.

How to explain investing basics to your kids

The conversation you have about investing with your kids will depend on their age, maturity level, and interest in personal finance. For very young children, consider starting investing on their behalf now. As they get older, you can use the accounts you’ve opened as a way to broach the topic of investing.

You can begin with general concepts, such as how a stock works. You can explain that stocks are really a way of owning a very small piece of a company. When you buy a stock, you receive a certificate (either digital or on paper) that shows how many shares of that company you own. When a company performs well, it’s worth more; so the stock you own is worth more. If your stock gains value, you can sell your stock and make a profit. It’s important to point out that stocks can also go down in value as companies struggle or business slows down. If you sell that stock when the value decreases, you’ll lose money.

From here you can explain more complicated topics, such as risk and reward. You hope that stocks will go up and you can sell at a profit, but that is not always the case. You can explain the idea of diversifying—not putting all your eggs in one basket—to help mitigate risk. You can begin to explain the different types of investments that could make up a financial portfolio, such as bonds and mutual funds.

Central to any discussion of finance with kids should be the way that investing fits into a larger program of healthy personal finance and long-term financial stability. Check out the Stash Way to learn more.

How to get your children interested in their financial future

Most young children will have a hard time internalizing the importance of saving for retirement when they’ve never worked a job or paid their own rent. But kids can understand that saving money could help them reach specific goals.

• Investing for shorter-term goals: Encouraging your kids to save for things that are important to them can help them experience the satisfaction of setting a financial goal and reaching it. For example, even if they’re still a few years away from getting their license, your middle-schooler may be ready to start saving up for their first car. Saving and investing over a few years can help them understand the balance of risk and reward, as well as market fluctuations.  
• Choose familiar single stocks: Explaining to your kids that they’re able to own a small piece of a company they’re familiar with, such as Coca-Cola or Nintendo is sometimes the quickest way to get them interested in investing.. From there, you can explain that by owning a small bit of that company, they’ll get to share in the profits it earns, if and when it earns profits, by way of dividends. While the stock prices of many major companies would normally put them out of reach for young investors, Stash allows investors to purchase fractional shares of thousands of top stocks.

Before you open an investment account for your child, consider your family’s goals. These will help dictate what type of account you may want to open. Are you trying to save for college expenses in a 529 plan, or do you want to teach your child about investing for retirement in a custodial account? You may even want to open multiple accounts.

How to open a custodial account with Stash

When you subscribe to Stash+ ($9/month) you can create two custodial accounts and there is no minimum initial investment². You and your kids will have access to Stash’s educational tools to help you make informed decisions about their financial journey.

The post Making the Best Investment Choices for Your Kids appeared first on Stash Learn.

This handy checklist can help you achieve short and long-term money goals, help protect your loved ones from the unexpected, and start the next generation off on the right path to financial success.

Consider making these money moves now.

Make saving and investing automatic

Whether you want to save for a rainy day or for a longer term goal (like a down payment on a home), automatic beats manual. By automating money from your checking account toward your goals, you’ll take the pain out of saving and get into the habit of putting money away.

Turn on “Set Schedule” from the Auto-Stash tile and save automatically.

Take care of the ones you love

Don’t stay up nights worrying about what could happen to your family if something should happen to you. A term life insurance policy, which covers you for a set period of time, is generally more affordable than a permanent life insurance policy, which covers you for your entire life. A bonus: The younger you are when you get a life insurance policy, the more affordable it is likely to be.

Start saving for retirement

Did you know that one in three Americans has less than $5,000 put aside for retirement? You can break away from the trend by opening an IRA today. And best of all, your money will grow tax-efficiently until you’re 59 1⁄2.

Got a 401K through your work? You can open a Roth or traditional IRA in addition to your workplace retirement account. All you need is $5 to start. The best time to start saving for retirement is today.

Want to learn more about what you expect to have saved by retirement? Check out our retirement calculator, then get Stash Retire.

Help your favorite kid

Wouldn’t it have been nice if someone had handed you money when you were first starting out?
Now you can do it for a child you love.

A custodial account lets you open an investment account that you can contribute to (while teaching your child about how compounding works along the way). Best of all, when the child grows up, he or she can use the money for just about anything.

Open a custodial account on Stash.

Congratulations! Take a victory lap, you deserve it.

The post 5 Responsible Money Moves You Can Make in Less Than 1 Day appeared first on Stash Learn.

But, really, in plain English, what the heck is a trust account?

Breaking down a trust account

The basic idea of a trust account is to designate another party to hold on to your assets, and possibly manage them, too.

There are several types of trust accounts designed for a variety of different financial planning purposes. Their primary use is to save money for a long period of time.

Trust accounts can be useful for estate planning because funds are delivered to a beneficiary quickly. The accounts also provide tax advantages and more privacy in asset dealings.

One of the most common examples of a trust account is an escrow account. An escrow account is set up at a bank or another financial institution that can legally perform certain duties on behalf of the account owner.

What’s the difference between a trust account and a custodial account?

Custodial accounts and trust accounts are similar.  Both account types have similar structures, including the ability for the account holder to authorize a separate party to handle the assets. However, custodial accounts have a specific purpose, which is narrower in scope than a trust account.

Custodial accounts

Custodial accounts can be thought of as a type of trust account, and are used to save money for children, their beneficiaries. These accounts are set up under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Custodial accounts allow minors under—generally defined as someone under the age of 18—to own an account without the burden of handling the assets. The responsibility of managing the account falls to the custodian. Custodians are usually the parents or appointed guardians.

Custodial accounts can help teach young people investing and money management basics, by allowing custodians to show them what goes into investing.

Individual retirement accounts, or IRAs, can also function as custodial accounts. Custodians, in those scenarios, are banks or financial entities responsible for handling the assets in your retirement fund.

What is a trust account?: Use cases

Aside from custodial accounts, there are many other types of trust accounts.

While custodial accounts are designed to save money for children, other trust accounts are designed to save money for family members in the event of the account holder’s death, or even for charities if the account creator wishes.

It’s likely that you can set up a trust that fits with your own particular plan. Trust accounts can be set up in a variety of ways to meet specific account requirements on how and when to use the assets.

Trust account advantages

Trusts allow for a significant degree of control over assets since you can specify the terms of the trust. Terms can include how to use and distribute the assets at an appointed time.

Trust accounts can also protect wealth—they lock assets into place for a specific purpose or beneficiary. Most trust accounts can even prevent creditors from touching the assets.

Trusts are also set up to protect your privacy. They can avoid probate, which is a process involving a court and a judge, that makes the use of your assets a matter of public record.

Trust account disadvantages

Setting up a trust account can be a costly and complex process.

Many trust accounts are also inflexible once they have been set up. For example, assets can’t be withdrawn or used for purposes that differ from the terms of the trust. For some accounts, the assets in the account may no longer even belong to you; They become the property of the beneficiaries of the account.

Custodial account advantages

Custodial accounts are generally flexible. The money does not just need to be spent specifically on educational endeavors, for example. The child can also use the money for purposes including travel or medical expenses once they reach adulthood and the money belongs to them.

Custodial account disadvantages

One of the key disadvantages of a custodial account, however, is that it can impact financial aid eligibility when it comes time to apply to college. Custodial accounts are assets in a child’s name, which can put a  family in a higher income bracket.

Another disadvantage is that tax breaks are limited for custodial accounts. Contributions under $1,050 go untaxed, while anything more than that can be taxed at different rates depending on where you live.

The investment choices in custodial accounts are also limited. The account is restricted to mutual funds and similar investment types offered by regulated investment companies.

The post What Is a Trust Account? How Is It Different from a Custodial Account? appeared first on Stash Learn.

Likewise, the best way to secure the financial future of your children is to start teaching them about money early. One potentially great way to do that is by opening a bank account for them.

There are two types of savings accounts to consider for kids: Savings accounts and custodial accounts. Both work differently than their adult counterparts, and you’ll need to know the ins and outs of these accounts before you drag Junior to the bank to open one up.

Why open a savings account with your child?

You can sit your kids in front of a book and hope they absorb the material, but as far as children and learning go, practical experience goes a long way.

The physical act of depositing cash or checks, checking an account balance, or watching interest accumulate can help teach your kids about money and financial responsibility. And these activities will hopefully become habits that keep your children saving and investing as they grow up.

Opening a bank account with your children can teach them the basics of money management, and some of the day-to-day habits necessary for financial stability.

Get them hooked on good habits, and you’ll set them up for success.

What should I look for in a child’s savings account?

A savings account should encourage kids to do just that—save their money. To that end, the account should have three characteristics:

No fees. Many banks charge annual fees, but they’ll discourage kids, who don’t want to see their money eaten up by a bank. Shop around for accounts that don’t charge maintenance or minimum-balance fees.

A debit card. Having a card with your kid’s name on it can build confidence and imply a sense of importance. Get a card, and teach your children how to keep it, and the personal identification number (PIN), safe.

A favorable interest rate. If children can see their money growing at a constant rate, they’ll be encouraged to save even more. Make sure the account has the best possible interest rate in order to reap the highest rewards.

How old do my children have to be to open an account?

Children who are 18 or older can open their own accounts.  If they are under that age, you’ll have to open a joint account with them.

Being co-owner of a joint account doesn’t give you complete control over it. However, it does give you and your children significant advantages in savings, investing, and managing taxes.

Can kids invest?

Yes–along with an adult.

Children can learn about investing through custodial accounts, an account that’s overseen by a parent or guardian, but managed for the benefit of the minor. Once you’ve funded the account, you can invest the cash just like you would in any other investment account, in stocks, bonds, mutual funds, and ETFs.

A custodial account can teach kids about investing and the stock market, along with the potential tax benefits and penalties that come with a return.

These accounts, too, have their own advantages and pitfalls, and it’s best to know each before you begin.

What should I know about custodial accounts?

People often use custodial accounts to for save for college, but they aren’t strictly college savings accounts.

Advantages of custodial accounts

High contribution limits. There is no limit to how much a custodian can deposit into a custodial account, but the custodian may trigger something called the gift tax for the amount of $15,000 or more annually. For married couples, the limit is $30,000, as of 2018.

Some custodial accounts aren’t ‘cash only’. Some custodial accounts allow donors to contribute not only cash, but stocks, annuities, bonds, life insurance, or even paintings. That means they aren’t just savings accounts– they’re portfolios.

Custodial can be used for other things besides college costs. Once they’ve reached adulthood, the beneficiary can use the funds for anything, such as a car, a house, even a graduation party.

Disadvantages of custodial accounts

Custodial accounts may count against financial aid. Even though custodial accounts aren’t necessarily college savings accounts, their value can be counted as part of a student’s assets when applying for financial aid.

Custodial accounts can be taxed. The custodian can put up to $15,000 into the account annually, without triggering the gift tax for 2018. (For married couples, the amount is $30,000.)  The gift tax is a federal tax on any transfer of assets from one person to another that exceeds these amounts. The first $1,050 of income, or capital gains, from the account is not taxed annually. After that, it’s taxed at the child’s rate, generally between 10% and 15%.

Any amount over $2,100 is then taxed at the custodian’s higher individual income tax rate, according to the most recent information from the IRS.

It’s always best to consult a professional tax advisor to discuss tax considerations.

How can I use savings and custodial accounts to teach financial literacy?

It’s nice to imagine your children retiring early, owning a large home, or any of the other advantages that might come with having money already saved at a relatively young age.

The money isn’t the most important gift, however.

Savings and custodial accounts can help teach kids good financial habits. Go with your children to make deposits. Check their account balances with them. Or if their money is invested through a custodial account, show them what they’re invested in, and help them keep track of what they have. Good financial habits acquired in childhood can last well into adulthood.

The post What are the Best Bank Accounts for Kids? appeared first on Stash Learn.

Here’s the thing. Many of these things we want (and need) cost money. This activity can teach kids how they can save for their goals and learn how long it takes (and how awesome it is) to achieve a goal.

No need to get fancy or be boring. All you need is a plan, plus four jars and a few simple craft supplies.

Teach your kids about saving and investing

Download the activity sheet

Let’s get started

Each jar will have a label for each “Stash” to be labeled: Needs, Wants, Goals, Causes.

What’s a “need?” – Something kids will use every day. Maybe new sneakers for basketball or a new writing journal.

What’s a “want?” – Something that’s special that may take a little while to save for. Think a new guitar or a tickets to see a favorite team.

What’s a “goal?” – Does this child want to get better at something? Or be something special when he or she grows up? A goal could be years into the future. Maybe foreign language camp? Or a fancy set of turntables to become an amazing DJ? Goals take time, this jar may take a while to fill.

What’s a “cause?” – Kids want to make the world a better place. Maybe he or she wants to donate money to support finding a cure for a disease or keeping their public library open. A little bit of change over the course of a year can make for a big donation. It’s never too early to be a philanthropist!

Final note! Consider rewarding your child for their great saving habits by matching their contributions in their Stash custodial account. You can use Stash dollars to signify each deposit!

What You Need

• Wants, Needs, Causes and Goals activity sheet — Download and Print [PDF]
• 4 jars or containers
• Scissors
• Tape or glue
• Writing or drawing utensils, decorations (optional)

Instructions

1. Brainstorm a list of wants, needs, goals, and causes that the child cares about.
2. Use scissors to cut out each label.
3. Adhere one label to each jar using tape or glue. (Optional: personalize your jars with decorations)
4. Place your jars somewhere safe, but in plain sight (so you don’t forget!).
5. Add money, loose change, or Stash dollars to them regularly. Spread the money among your four Stashes.

Talk to your kids

How is a want different from a need? Is clothing a want or a need?

What’s the difference between a need and a goal? Is owning a house a need or a goal?

How much money do you need for your Wants? Needs? Goals? Causes?

How much time do you have to save for these?

How much money should you contribute each day?

How will you spread your money across all four jars? Are some jars more important than others?

The post Got Four Jars? You Can Teach Your Kids About Money appeared first on Stash Learn.

More American dads are excited about fatherhood and are just as likely as moms to say that parenting is extremely important to their identity. If only someone gave dads (and moms!) a financial planning guide for how life with a new baby can change things.

Clothes, formula, baby food, and diapers—so many diapers—all add up, say these new dads who went from loose budgeting, if any budgeting at all, to keeping a tight rein on spending.

Check out these anecdotes and money lessons from these dads who fell in love with fatherhood (and learned how to budget while doing it).

Mike Watts, 41, Studio City, California

Before baby Madelynn was born, Mike Watts and his wife were taking full advantage of all New York City had to offer.

There were Broadway plays, baseball games, and expensive dinners out with friends.

“We obviously made sure we had enough for rent and the regular bills, but anything beyond that went right back out the door,” Watts said. “Having a baby changed everything.”

Big eye-opener? Daycare alone was $330 per week.

“We had to cut back significantly and make sure that all the money we had, went into making sure the baby was taken care of,” he says.

Once they had it figured out, along came baby Hudson. By that time, Madelynn was seven and they had moved across the country to California. And once again, they were faced with an onslaught of diapers and daycare expenses.

Watts sets up his paychecks so that a couple hundred dollars go directly into a savings account. “I can’t spend what I don’t see, right?” he says.

Watts also changed careers, leaving the media world to become a certified financial planner, which has helped not just his clients, but his own family.

“We continue to save for higher education for the kids,” he says.“It’s harder than you think, but we’re trying to become more diversified.”

Watts’ top money hack: “When I go to the grocery store, I refuse to use a shopping cart or basket, I only buy what I can carry,” he says. “It keeps me from buying items we really don’t need.”

Advice to new dads: “Set up a ‘baby savings account within your bank and just leave it there, even if you are months away from the baby actually arriving, Watts says. “While you don’t get a great return from a regular savings account, just starting the process can force you into re-thinking your budget and your spending priorities,” he says.

David Kiner, 34, Enfield, Connecticut

When David Kiner’s daughter was born six months ago, he and his wife put a serious hold on their dinners out and weekend getaways.

The money he and his wife, Gina, save goes directly toward their daughter’s care and supplies, with most of that, he joked, being spent at Target.

But staying home instead of painting the town is actually okay with him. “You’ll want to stay home to support the mother of your new baby,” he said. “Plus, more likely, you’ll be pretty tired.”

Kiner did, however, recently get a chance for his first night out with friends since his daughter was born. What began as a low key and low-cost night out at a local brewery nearly ended in (minor disaster) after he got pulled over for speeding.

His first thought was how he’d already blown his budget before he even got there.

“I could only laugh to myself as I thought, ‘Great, my first night out in quite a few months and it’s going to be an expensive one,’” he said. “Luckily, I was able to get away with only a warning.”

Kiner’s top money hack: Have your employer directly deposit a portion of your paycheck into an account that is not used to pay bills, Kiner says. One of their top financial priorities is saving for a bigger house, so they can expand their family.

Advice to new dads: “Prioritize your spending really fast–it’s not even an option–diapers are expensive,” Kiner says.

Travis Shock, 33 Pekin, Illinois

Before his son was born, Shock said his financial priorities consisted mostly of contributing to a 401(k) and, “how much golf I could get in during the summer without annoying my wife.”

Shock was in for a shock.

“Everyone tells you how expensive babies are,” Shock says. “We did not take it into true consideration.”

While Shock and his wife, Molly, entered into parenthood without a formal budget, they now keep track of weekly line items for everything from supplies to clothes to daycare.

Shock’s top money hack: To increase their savings they are “dropping a few things that are not necessary, such as our country club membership and cable.” That money is going into saving for a family trip to Panama Beach, Florida and making improvements to their house.

Advice to new dads: “Be ready and excited to give up certain things in your life,” he says. “It’s actually pretty easy to do.”

Welcoming a new little person into your life can be overwhelming in the best way possible, but it can also stress you out financially.

With good budgeting and financial planning—and these tips from other dads—you can spend less time worrying about your wallet and more time enjoying your new family.

The post New Dads Give Their Best Money Hacks appeared first on Stash Learn.

No need to wrack your brains to figure out the perfect Mother’s Day present. Luckily, what we really, really want doesn’t cost a penny.

That’s right, some of the best Mother’s Day gift ideas are absolutely free. You could be a hero to your wife, girlfriend, sister or the mother in your own life for zero dollars.

Take notes and remember to read the fine print. Be sure to include a card, because, come on, it’s your mom.

1. Sleep.

I spoke to lots of moms about their ideal Mother’s Day gift and quality shut-eye was the top request.

It seems so simple, but it’s a treat that many mothers aren’t able to give themselves. There are diapers to be changed, breakfasts to be made, piles of laundry to get started, and dishwashers to unload. Why, oh why can’t the kids just make themselves a bowl of cereal and watch cartoons like we did in the ‘70s and ‘80s?

“I don’t want or need anything too big for Mother’s Day, but if my husband could get up and deal with breakfast and keeping the kids entertained in the morning, it would be amazing,” said Shana Westlake, a Washington D.C.-area mom of a 5 year old and a 2 ½ year old.

Erika Holmes, a Tampa, Florida mother of two toddlers, concurred: “Just let me sleep.”

The fine print: Sleep means actual unconsciousness when you are unaware of what’s happening around you. Letting the kids run around outside the door while you tell them to knock it off or letting them yell “When is mom getting up!?” does not count. Let her sleep til noon if you can and try not to have a million catastrophes waiting for her when she opens the bedroom door.

2. Free babysitting.

Massages and pedicures are popular Mother’s Day gifts, but when are moms actually going to get to do those things? That’s where free babysitting comes in.

Paying for a babysitter to go enjoy life’s luxuries not only sucks your wallet dry, but it also affects your guilty conscience. You start thinking about all the other things you could be spending that money on, or feeling bad that the kids are parked in front of the TV, while the babysitter updates her Instagram account on your dime.

That’s why having a partner, a best friend, a mom, a grandmother —anyone who offers, really—watch the kids for a few hours is such a gift.

Alice Gomstyn, a New Jersey mother of two young sons, said she’d love to work someday with a musician to realize her side hobby of writing song lyrics. But with two kids in school and extracurricular activities, a husband with a monster commute into New York City and a full-time job, it’s a dream that seems unattainable without some help.

Massages and pedicures are popular Mother’s Day gifts, but when are moms actually going to get to do those things?

That’s why this year for Mother’s Day, Gomstyn would love someone to come babysit her 5-year-old and 7 years old — for free. The time spent creating, she joked, it would benefit the whole family.

“The kids really don’t need to hear all of mommy’s angsty masterpieces,” she said.

The fine print: This gift is best given without any strings attached by a partner, friend, or even a grandma or grandpa. That means you can’t take mom on a guilt trip six months later to get time to yourself. Offer a few nights or afternoons and etch them in stone on both your calendars.

3. Quiet time

… alone. Mothers devote almost all of their waking hours to keep their kids healthy, fed, entertained and enriched. But those moms need all those things too.

“I would love alone time to sit and finish reading a book,” said Danielle Dreger-Babbitt, a Seattle mom of a 3 ½-year-old. “Or even time to read a chapter.”

Just to be clear, Dreger-Babbitt was referring to a book without pictures in it.

The fine print: As with sleeping in, quiet time means actual quiet. Preferably with everyone out of the house. Putting a movie on for the kids is not quiet time. Give her a time frame every week where she knows she can pull out that paperback for an hour.

4. Dinner duty handled.

Dinnertime is a mom’s ultimate Kryptonite. They may have big plans at the beginning of the day for a well-rounded meal that the whole family will enjoy, but the reality is that by the end of the day when she’s exhausted, the kids are whiny and the dog needs to be fed, that dream of a delicious dinner turns into a nightmare.

Cooking dinner for the mother in your life, then packaging up leftovers, doing the dishes and cleaning up the kitchen is worth way more than that trip to Bath & Body Works you might have been planning for her.

And you’ll get major bonus points if you do it for an entire week.

The fine print: A nice dinner means protein, some kind of veggie and a side dish. Handling dinner does not mean ordering pizza or Chinese. No, french fries do not count as a vegetable.

5. Appreciation from the kids.

Moms don’t do it all for the glory. In fact, there is actually very little glory in day-to-day parenting. We do it because we love our children and want to see them become happy, productive and kind human beings.

But a little thanks goes a long way. This is especially important to single mothers who don’t have the help of a spouse. Helping a child come up with a gift is a win-win.

“I am a single mother and rarely get Mother’s Day gifts. I hate to complain because it’s not my son’s fault no one has helped him do Mother’s Day,” said Debby Florence, a mom living in Montana with her 16-year-old son. “The best free gift I could get is if someone helped my son come up with nice little free things to do for me so he can experience what it is like to surprise his mom with something nice.”

The fine print: Let the child take the lead on this one. Helping the child make a drawing or art project, or come up with something nice all on their own will make mom melt every time.

The bottom line, mothers say, is that they’d love a break. Something that’s just for them. Something that shows them they are valued and loved.

That is worth more than anything money could buy.

Want to help a mom start saving for a child’s future? Setting up a custodial account is a snap.

The post 5 Free (Yes, Free) Mother’s Day Gifts She’ll Actually Want appeared first on Stash Learn.

What’s a custodial account?

Custodial accounts are essentially brokerage accounts for children—with some investing and tax benefits—that you control until they are no longer minors. (That’s usually between 18 and 21 years old, depending on state law.)

Custodial accounts have been around for decades. They’re also known as Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts.  Generally speaking, different states typically allow one versus another. UTMAs allow for investments in more types of assets, including real estate. UGMAs confine themselves to more traditional securities, such as stocks and bonds.

Stash will automatically choose the right account based on state requirements, so you don’t need to do anything here.

How long will the process take to open the account?

We clocked the entire online application process at about 30 seconds from start to finish. You will need each minor’s name, address, social security number, and date of birth. Since you already have a Stash account, we have most of your information, so it’ll be super easy.

After I set up a custodial account, what do I do next?

First, feel proud! You’re helping a child save for his or her financial future. Next, keep adding money to the account on a regular basis, or whenever you can. You can turn on Auto-Stash and set a transfer frequency and amount that you feel comfortable with.

If the child is old enough, start talking to him or her about what the account is and how it works, and how it will help them later on. The education that they can get by understanding investing and saving will be theirs for life!

How many accounts can I open?

There is no limit to the number of accounts you can open—you can open as many as you want. You can open them for your own kids, as well as the children of extended family members. You can even set up accounts for your friends’ children, or any other child whose financial life you’d like to support.

Can you take the money out of a child’s account?

Nope. Here’s something really important to keep in mind: Once you’ve set up a custodial account for your child, it’s considered a permanent gift. They own it immediately and control it once they become adults. In other words, you can’t take the money back and use it for yourself—it’s their money from the moment you set up the account. But it’s your job to oversee the account and make sure you invest what’s in it wisely.

If you decide to pull money out of the account, it must be for the child’s exclusive benefit and not your own. That means you can’t use it to pay for things like the family grocery bills, rent, or a family vacation. You can use it for things the child’s school expenses, music lessons, even athletic or computer equipment.

Why do you need the minor’s info and SSN?

We don’t want it, but federal regulations require us to provide it. We also need it to transfer the account to the child when they are of legal age.

When the minor becomes an adult, how do they get the money?

When the minor becomes an adult, the account will become theirs, and they can use the money for whatever they need. That can mean paying for higher education, buying a first home or renting, books, travel, even a first car.

Are there other ways to get money into each custodial account I open?

For now, the money will need to come from your linked bank account. We plan to offer more options in the future.

What if Stash gets sold or goes away?

Stash does not hold your securities or cash. Apex Clearing, our custodian, does. You are buying real securities with your money. SIPC would return up to $250,000 in cash and up to $500,000 for non-cash investments such as stocks and ETFs in the event of fraud or bankruptcy. It’s important to keep in mind however, SPIC does not protect your investments from market value changes. So basically, you’re covered.

How do I learn more:

Here’s additional information about custodial accounts if you want to learn more:

• What Are Custodial Accounts?
• How Custodial Accounts Can Help Your Kids Learn About Investing
• What’s a Custodial Account? Two Things to Know

Again, you’re awesome for giving a child a stronger financial future.

Brandon Krieg

CEO – Stash

The post Stash CEO Answers Your Burning Questions about Custodial Accounts appeared first on Stash Learn.