Hey, it’s Dan (with my dad, Steve)
This week we’re diving into a question from Choneyboy: “How do I give money to my kids — and is it even a good idea?”
Here’s what we cover in this issue:
💰 Three practical ways to gift money to children — UGMA/UTMA custodial accounts, Roth IRAs, and 529 college plans.
📊 The tax thresholds and traps parents overlook when gifting.
🏦 Which strategies we like best (and which ones we’d avoid).
👉 All that and more below.
Money Concept: Gifting Money to Children
Dan (Millennial):
“This one came from Choneyboy — he wanted to know the smartest way to gift money to kids without accidentally setting them up to blow it at 18 on a jet ski. Dad, walk us through the real options.”
Steve (Boomer):
“There are a few solid ways to gift money to kids. But here’s the truth — once it’s theirs, it’s theirs. If you don’t trust your kid, you can always set up a trust with restrictions. You could say: some money at 21, some at 25. But in my opinion, that’s more trouble than it’s worth. I trusted my kids, and yeah, you might get burned — but I think the chance is small. You have to look at your own kids and decide if you’re comfortable handing over the reins.”
Three Paths Parents Can Take
1. Uniform Gifts to Minors (UGMA/UTMA Accounts)
Parent (or grandparent) sets up a custodial account in the child’s name.
Advantages:
Money legally belongs to the child.
Taxed at the child’s rate up to $1,350 of unearned income.
No restrictions on how funds are invested.
Annual gifting allowance of $19,000 per person ($38,000 for married couples) without triggering gift taxes.
Disadvantages:
Gifts are irrevocable — once given, it’s the child’s money.
Counts as the child’s asset on FAFSA, potentially reducing financial aid.
At age 18 or 21 (depending on state), the child gains full control.
👉 Our take: A great way to start small, simple investments — but you have to trust your kid won’t blow it on a Disneyland trip at 18.
2. Custodial Roth IRA
Child must have earned income (chores, babysitting, part-time jobs).
Contributions limited to the lesser of earned income or $7,000/year (2024).
Advantages:
Tax-free growth.
Contributions can be withdrawn anytime.
Earnings can be used for a first home or education without penalty.
Doesn’t count as the child’s asset for FAFSA.
Disadvantages:
Requires legit earned income.
Withdrawal rules can get confusing.
👉 Our take: If your kid mows lawns or flips burgers, this is one of the most powerful long-term wealth gifts you can give.
3. 529 College Savings Plan
Parent or grandparent opens and controls the account; child is beneficiary.
Advantages:
Grows tax-deferred, tax-free for qualified education expenses.
High contribution limits ($200k+ in many states).
Flexible beneficiary rules (can change from one child to another).
Disadvantages:
Must be used for education (college, some trade schools).
Limited investment choices.
Early withdrawals for non-qualified expenses = taxes + penalties.
👉 Our take: Great tool if you’re confident your child will pursue higher education. If not, you may prefer the flexibility of a custodial account.
📌 Key Takeaways
UGMA/UTMA = flexibility, but loss of control at 18 or 21.
Custodial Roth = best for kids with earned income, massive long-term upside.
529 = great for college funding, but too restrictive if you want flexibility.
🎬 Want More?
👉 [Watch the full breakdown on YouTube → Link]
💬 Join the MBMC Community on Skool for deeper discussions — just $5/month (and free if you refer 2 friends).
⚠️ Not financial advice. Education & community only.
PS. We Read Every Reply
This episode came straight from Choneyboy’s question. What do you want us to cover next? Reply back and let us know — the Boomer is at your disposal.
-Dan & Steve