If your top goal is general savings or a future first home for the young adult<\/p>\n
1. Start by opening a Trump Account and claiming seed money, if your child is eligible.<\/p>\n
If your child qualifies for the $1,000 seed, it will be placed into a low-fee mutual fund<\/a> or ETF<\/a> that seeks to track the stock market, giving the account the potential for long-term growth.<\/p>\n Because Trump Accounts are designed for retirement, this step can be a long-term complement to accounts that may be better suited for general savings goals for children.<\/p>\n 2. If available, contribute to the Trump Account via your workplace plan.<\/p>\n Some employers may provide a direct contribution up to $2,500 per year per employee on behalf of the employee\u2019s dependent. If you have multiple children, the employer may split the contribution among them. For example, if you have 2 children, it could be split $1,250 per child. These pre-tax contributions are not treated as income to the parent, and the amount is determined by the employer.<\/p>\n Employees can elect to redirect part of their pay pre-tax into a child\u2019s Trump Account through their employer\u2019s benefits plan. If your employer allows contributions to a Trump Account through a Section 125 cafeteria plan, aim to contribute the full amount\u2014up to $2,500 per year per employee. Combined pre-tax employer and employee contributions cannot exceed $2,500 per employee per year.<\/p>\n Both types of contributions, employer and employee, count toward the annual contribution limit for Trump Accounts, which is $5,000 per child. Withdrawals, which will generally only be allowed after age 18, will be taxable because the contributions were made pre-tax.<\/p>\n Not all employers will offer these features; if yours doesn\u2019t, move to the next step.<\/p>\n 3. Use an UGMA\/UTMA to save for broad goals.<\/p>\n UGMA\/UTMA accounts can help build savings for life\u2019s early milestones\u2014cars, rent deposits, travel, or even a first home. Earnings may be subject to the kiddie tax<\/a> each year, and withdrawals of earnings during the college years would be taxed at the parent\u2019s rate, including withdrawals of capital gains<\/a>. Withdrawals made after college are taxed at the child\u2019s presumably lower rate.<\/p>\n Alternatively, a child-owned brokerage account like the Youth\u00ae Account.<\/p>\n For children aged 13 through 17, the Fidelity Youth Account<\/a> is a brokerage account owned by the child. It is not a custodial account, but a parent or guardian must open the account for the teen. Taxes on any earnings do follow the same treatment as applied to UGMAs\/UTMAs.<\/p>\n 4. Add a Roth IRA for minors when earned income begins.<\/p>\n Once your child has earned income, a Roth IRA<\/a> becomes a powerful, flexible long-term tool. Contributions can be withdrawn tax- and penalty-free at any time, and any earnings can be used tax- and penalty-free (up to $10,000) for a first-time home purchase once the account has been open at least 5 years<\/a>. This makes the Roth especially valuable for young adults building toward a first home.<\/p>\n","protected":false},"excerpt":{"rendered":"If your top goal is general savings or a future first home for the young adult 1. Start…\n","protected":false},"author":2,"featured_media":615033,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,266990,266988,147,530,207879,266989,266991,266992],"class_list":["post-615032","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-how-does-a-trump-account-work","tag-how-to-save-money-for-kids","tag-personal-finance","tag-personalfinance","tag-trump-account","tag-trump-account-details","tag-trump-account-eligibility","tag-trump-account-vs-529"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/615032","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=615032"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/615032\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/615033"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=615032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=615032"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=615032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}