For example, if you invest just $5 a day for a child from birth, considering a 7% average market return, that Early account could have more than $60,000 by the time the child is 18 years old.Īnd the access to expert financial advice is a nice touch, especially if you don’t know much about investing but you want to quickly grow your knowledge.Īcorns also has a unique “Earn” feature that allows users to earn more money for their account by shopping, job searching and inviting friends. There’s also the potential to save a significant amount of money. These can include a car, travel expenses, college application fees, and other costs considered a non-qualified expense in a 529 account.
It’s very flexible.įor parents that have decided a 529 college savings plan is the primary way they want to save for college, a UGMA/UTMA account can be a good compliment since these accounts can pay for non-qualified expenses. However, the money saved in Acorns Early can be spent on college, to purchase a vehicle, or anything else the child needs once they become an adult. Money saved in a 529 plan can only be spent on qualified educational expenses, such as tuition, fees, books, school supplies, and so on. Perhaps the biggest benefit is that there are no restrictions when it comes to qualified expenses. Pros of Acorns Earlyĭuring our review, we uncovered many advantages of Acorns Early.
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Access to family financial advice via articles and videos from expertsīesides that, you also have access to Acorns’ full financial wellness system that comes along with built-in investment, retirement, and checking accounts.Exclusive family-friendly bonus investments.The option to add multiple children at no additional cost.
Here are some important Acorns Early features to review: The funds in the account become available to the child at their “age of transfer,” which is when they’re legally considered an adult based on their location, usually 18 or 21. The money is invested in a mix of exchange-traded funds (ETFs), which Acorns selects based on your financial goals. You can set up daily, weekly, or monthly recurring investments to make payments convenient and hassle-free. While a child is a minor, funds can be used to pay for expenses that benefit the child, such as clothes for school and summer programs.įirst, you create an account on Acorns Early, which can be done in under five minutes. The funds in an UGMA/UTMA account can be used for anything – a car, travel, or other college-related expenses not consider a qualified expense, such as application fees or health insurance. To avoid a penalty with 529 plans, money needs to be used for specific educational expenses, including tuition, books, supplies and a computer. Anything over that is taxed as the parent’s income.īut compared to a 529 plan, UGMA and UTMA accounts provide more flexibility in how the funds can be used. The next $1,100 is taxed at the child’s rate. The first $1,100 of a child’s unearned income is tax-free. You can contribute up to $15,000 annually without incurring a gift tax ($30,000 per married couple).
UTMA and UGMA accounts do not have the tax benefits that a 529 plan offers. Contributions are made with after-tax dollars. Since 529 plans are usually reported as a parental asset, they reduce aid by up to 5.64% of the asset value. When it comes time to fill out the FAFSA (Free Application for Federal Student Aid), UGMA and UTMA accounts are reported as a child’s asset, reducing aid eligibility by 20% of the asset value. UTMA/UGMA account have a less favorable financial aid impact than 529 plans. Both accounts allow you to transfer financial assets to a minor without establishing a trust. UGMA and UTMA accounts allow parents to save money and invest and maintain full control until their child is an adult. The custodian controls the account until the child reaches the age of majority in their state. A custodian, typically a parent or other relative, sets up the account in the child’s name. UGMA and UTMA accounts are custodial accounts under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act. Unlike a 529 college savings plan where the funds can only be used for education, the money saved with Acorns Early can go toward anything that benefits the child.
This Acorns Early review will help you decide if this type of account is right for your child. It’s an UTMA/UGMA account that lets parents, guardians or family members create a custodial account for a child right in the app. Acorns Early is a simple way to invest in a child’s future.
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