Opening bank account for 5 year old

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Faisal
Posts: 176
Joined: Sun Dec 18, 2016 6:37 pm

Opening bank account for 5 year old

Post by Faisal »

I am thinking of opening a savings account for my 5 year old and depositing say a 100 bucks every month. Considering it as a saving mechanism for him and for other family to deposit money into. My parents and in laws are getting old live abroad so us easier to transfer money then deal with inheritance issues I'm various jurisdictions.

I was wondering if there are any tax issues or any other issues I should be aware of with opening the savings account.
livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Opening bank account for 5 year old

Post by livesoft »

Yes, there can be tax issues if the savings account pays a lot of interest. Check out "kiddie tax" and the instructions to IRS Form 1040.

However, I cannot imagine the savings account paying "a lot of interest", so this is unlikely to be an issue.
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Bogle7
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Re: Opening bank account for 5 year old

Post by Bogle7 »

Credit union, not bank.
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chrisam314
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Re: Opening bank account for 5 year old

Post by chrisam314 »

Capital One has a kids savings account that I use whenever someone makes a check out to my daughter. Its straightforward. Interest is minimal.
rkhusky
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Re: Opening bank account for 5 year old

Post by rkhusky »

I just keep track of the kids’ savings in a spreadsheet. And invest the amount in my own accounts. I am currently giving 2% interest, paid annually.
Doc7
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Re: Opening bank account for 5 year old

Post by Doc7 »

My 6 yo son’s allowance is split in 3 - 1/3rd goes in a mason jar labeled giving, 1/3rd in a jar called hobby (same as his parents allowance is called ;) ), 1/3rd goes to a Fidelity UTMA on auto purchase of FSKAX total market index fund. They have minimum limits…. So it’s $19.50 auto deposit quarterly. Chores don’t pay too well at my house. I like the auto set up because when he gets a “raise” I just log on and change it, I imagine by the time the account is legally mandated to be turned over to him it will have a nice chunk of change in it and we will have spent quite a bit of time over the years talking about these little pieces of companies he owns.

I do plan to “tax gain harvest” meanwhile.
Dorset2MD
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Re: Opening bank account for 5 year old

Post by Dorset2MD »

Related, if you haven't read it, I highly recommend The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. I started some concepts in there with my then 6 year old. I will say that having the physical spend, save, give jars on her dresser and seeing them slowly grow (regularly $0.50/week/age for 'allowance') and deplete (when she wanted to spend) with actual bills and coins was a great tangible way to appreciate money. Made her think twice about certain elements and we made a project out of making and decorating the jars as well.
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