Ask Jean: What's The Best Way To Set Up A "Gift" Fund For My Nephew?
Trying to make the most of ask jean what way? You are in the right place. Below we break it down in plain English, with practical tips you can actually use.
Key Takeaways
- A reader asks HerMoney CEO Jean Chatzky: "I’d like to start a ‘gift' fund for a nephew to contribute to every birthday and special occasion.
- What’s your best recommendation for this?
- A savings account, or something else?” Q: Today’s question comes from Deb.
Q: Today’s question comes from Deb. She writes: I’d like to start a little “gift” fund for a nephew, for every birthday and special occasion, to put aside some money for him until he’s 18. What’s your best recommendation for this? A savings account, or something else?
A: Look at you, you generous aunt. There are a few options you can consider. First, you could open up a 529 college savings plan. With a 529 plan, your money grows tax-free and withdrawals are tax-free if used for qualified educational expenses. One of the big question marks with 529 plans is “What if the child doesn’t go to college?” For more on how that’s handled, head here.
You could also consider a high-yield savings account (HYSA). HYSAs are simple to set up, and you can contribute regularly. HYSAs have been enjoying some excellent rates recently, so this is an option worth checking out.
Lastly, you could open a custodial account. This would allow you to invest in stocks, bonds, mutual funds and other securities. With this option, the major plus is that the money could have the potential to grow more as the years go on.
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Originally published at savingswitch.com.
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