I want my kid to invest for educational purposes, I see 2 options:
1. Taxable custodial account
2. Roth IRA
Are these pros/cons correct? or is any of them "not really"?
Taxable custodial:
- PROS: as long as I make sure there aren't more than 1K passive income, no need to file tax return for kid. so no complications tax wise
- CON: will lower the kids collage financial support
Roth IRA:
- PROS: not impact collage stuff, grow tax free, no worries about taxes since no passive income
- CONS: kid need to "earn income" to contribute. If I pay them more than $400 for that year for earned income (take care of pet sitting paid by neighbors, or if I pay for household tasks like garden care) the kid must file taxes AND pay self employment tax at 15%