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I use 529. If the funds will be used for education, paying no tax on gains is hard to beat. State deduction is a plus also.
I have Ohio 529 for my daughter,I live in Texas
Downside to UTMS/UGMA is that they negatively impact financial aid options, should they need that later. Also, they do not have the tax benefits of the 529.
Pros: UTMS/UGMA are much more flexible in how funds can be spent. 529 requires specific educational expenses; however the UTMS/UGMA fund can be used for anything, including things for your child when they are still a minor - such as medical bills.
Reading about them, a combination of both could be a good option. I’d do a 529 for big savings towards tuition and UTMS/UGMA plans for general trust account for kids/for use in emergencies.
Yes, this was my plan. Have my kid see how the account gets impacted and he can invest his birthday/gift money, if he chooses.
Pro
No.
I mostly invest in funds. I can do the S&P in her 529. the tax benefits
If we withdraw for non-education, the net return after taxes/penalties won’t be any different than if we did a regular brokerage/UTMA