About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 575 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 9 comments… read them below or add one }

YFS

I don’t have children yet but, my wife and I have decided to use a taxable investment account for child expenses. We don’t qualify for an IRA and we didn’t like the 10% fee that comes with not using the 529 funds for qualified educational expenses. Also, there is often less flexibility with the 529 plan and how you can invest.

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Hank

You are right about flexiblity. If you want to be able to use the account for anything that you wish, then a 529 College Savings Plan is not the answer you are looking for. The one benefit of a 529 College Savings Plan is its tax free use for education. With flexiblity comes more taxes but also more options.

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funancials

Hank-
The parents opening a Roth for their 12-yr old (minor) would be an interesting post in itself. The income is supposed to be “taxable” but they don’t necessarily have to pay tax on it. Example: if a child (age 16) earned 2k bagging groceries, they (most likely) wouldn’t pay tax on this, but could use it fund a Roth IRA. So if the employer is now a parent or neighbor, how closely would the IRS look into this? Getting paid for a chore hardly seems like a taxable event, but the IRS may let it slide…

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Hank

funancials,

I’ve written about that before. You have to keep good records when you have a minor open a Roth IRA or if you open one for the minor with respect to the income they earned. Remember, they can only invest $5,000 each year in a Roth IRA or their total earned income, whichever is less for the year.

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Miss T @ Prairie Eco-Thrifter

I too don’t have children yet but we definitely plan on utilizing options like these when they do come along. We live in Canada so the options available are a bit different but the principle is the same- give your kids a head start. Thanks for the information.

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Marie at FamilyMoneyValues

Not that I am an expert, but I believe there are multiple tax and scholarship eligibility impacts from investing in a child’s name that should be reviewed with the appropriately trained professional.

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Hank

Marie,

You are absolutely right. 529 College Savings Plans should be held in the parent’s name with the child as a beneficiary for taxes, scholarship opprotunities, and transferablity.

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Suba

We don’t have kids, but we are debating opening a 529 in my husband’s name and a ROTH IRA in our name. Both of them for the purpose of their education. Right now along with our 401k, we don’t have enough to contribute to a ROTH IRA, so if we open one it would be for the purpose of education for the (future) kid(s).

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Hunter - Financially Consumed

Great article Hank. Our three kids are all under age 10, so we only have a 529 account established for each of them currently. As their personal assets accumulate I will be encouraging them to seek higher returns, as you suggest. Investing is a learning experience and if they can learn some valuable lessons without risking too much they will be better prepared to manage as they mature.

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