Philadelphia Nesties
tracyd21
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What to do with monetary gifts for baby?
We had DD's baptism weekend and received monetary gifts. Not sure what the best way to handle it is. We were told that we shouldn't open a bank account in her name because it will hurt her when it comes to college financial aid...but we have checks made out to her?
My parents opened a mutual fund for her and we will probably add some money to that, but I'm thinking a 529 also.
We will probably seek out the advice of a financial planner - just looking for some initial ideas to research myself first.
Re: What to do with monetary gifts for baby?
I put it in his own savings account. I might roll it into a 5 year CD since it'll gain better interest.
I never heard about the college financial aid issue.
#1 12.11.11
#2 10.23.13 EDD
Unless you are getting tens of thousands of dollars for gifts (and maybe you are
), I can't understand how a small savings account will impact a child's college funding some 10-15 years later.
eta: chances are, you will find suitable ways to spend the money before then (music lessons, dance lessons, etc.).
We did a savings.
Also your parents income matters more with a FA and college. Unless we are talking trust fund amounts of money. And then you wouldn't need FA anyway.
Also when he gets money now sometimes like erbut mentioned we use it for lessons or experiences.
Definitely true. When you fill out the FAFSA, which is the federal financial aid that as far as I know all colleges require, it takes into account assets in both the parent and child names, and calculates both a parent and child contribution. ETA: Or maybe that is what my particular school did -- who can contribute what might be the variable the school sets, but the info is still taken into account.
What an individual school does with that info varies -- but the FAFSA does tell the school what each party typical has the ability to pay based on assets.
We have savings for each kid my parents set up and contribute to. TBH, my best guess is we will use them to pay for private HS and it will be a non issue come college time.
The advice was given to me by my uncle, who was told this by his financial planner. His daughter is starting the college application process this year so it is recent advice. The planner said open an additional savings account in the parents' names to use for the child. The only account that should be in a child's name is a 529 plan.
Apparently when colleges look at your assets for financial aid, they can use 100% of money in the child's name, but they can only use 30% of parents' money.
Good advice about the savings account. I didn't know that about financial aid. I have an account where E and I are joint owners over at ING. I think most of that money will be for lessons, schooling, etc, anyway...but good to consider.
One thing you asked about was checks made out to the child. I don't get why people do this but they do, my SIL always does it, I think she thinks we'll take the money otherwise. I think it depends on your bank, but at least at TD they have said sign the back of those checks and then write, Parent of a minor child. I haven't had any problems so far.
This whole FA thing is interesting. Will have to ask our advisor about it when we see him next month.
We have a 529 that we automatically pay into monthly, and the grandparents have put some money in as well. Otherwise, we have a savings account for him. This is where things like birthday money will go. I envision giving him access to this money when he goes to college, which is what my parents did for me, but it's possible we'll spend it on something on his behalf before then. I don't imagine the account amassing a ton of money.
This is right up there with people who give checks at weddings addressed to "Mr. and Mrs. Smith". Luckily (or not) my bank does care about this stuff, but come on. Are people really going to go change their name before they deposit a check?
Wow, all good to know. I was actually thinking about opening a savings account in LO's name for this purpose.
My H was a bank teller way back when and this used to infuriate him. He always lectures when we go to a wedding to address it to Bride's Maiden name AND Groom's name.
haha, I used to be a bank teller in college, and that bugs me too. Although we address wedding checks Bride's maiden name OR Groom's name so they both don't have to sign it. When we got married I had to go through and figure out which I needed to sign, which dh needed to sign, and which we both needed to sign. Then there were those I just signed as my married name and put for deposit only.
I'm a dumb dumb. That's totally what I meant.
I remember discussing this with my mom when I went to college. The saying 'you're damned when you do, damned when you don't' comes to mind. So kids shouldn't learn how to save their own money and learn a bit of financial responsibility? No wonder the economy is in the sh!tter.
#1 12.11.11
#2 10.23.13 EDD
I don't disagree, but I paid the price for my parents setting up mutual funds in my name and graduated with more than $60K in student loans, which was only half of my tuition (my parents paid the other half). We were misguided by a college financial planner and learned this after it was too late (and the guy disappeared off the face of the earth). I was already enrolled and we got the bill about a week before I was supposed to move in. I don't regret my decision to attend school where I did and I would do the same thing over again given my experience there...but had we known in advance what my college education would have cost, I probably wouldn't have applied there in the first place and would have stuck with state schools. At this rate, I will be close to 50 before my undergrad degree is paid off. And this is not because of financial irresponsibility; it's because my parents made an un/ill-informed decision about how to handle my money when I was an infant. If they had known to keep that money in their name, I may have qualified for more financial aid.
I don't think there is anything wrong with setting a child up for less debt, as long as you are teaching him/her how to manage money. The money will be hers whether it's in her name or mine. I'm not going to punish my kid with the kind of debt that I have now.
I wish this was true for me.
We do the experience thing for Brooks too, lessons in the future. But honestly I considered it his car fund too.