Dec 1, 2021
You’ve heard it from day one: “They grow up so fast.” (Spoiler alert: It’s true.) They learn to crawl, and before you know it, they’re off to college. As a parent, you want to prepare them for that moment. For their futures.
If you know all about Greenlight’s investing for kids, it’s time to learn how YOU can invest for their futures, too. We’re here to show you how investing with Greenlight can make a big difference in your kids’ financial futures — especially for college savings.
83% of parents pay for a portion of their child’s education costs. How? Let’s take a look at some of the ways parents can save for college.
The average cost of college in the United States is $35,720 per student, per year. That number is on the rise — about 6.8% annually. That’s a big price tag, but don't sweat it. With a little planning and a lot of smart money moves, you can put compound growth to work to save for your child’s future. (And with an investing app for kids — like Greenlight — so can they.)
We know you might be thinking, “Why don’t I just save for college?” Saving is important for rainy day funds. But when you need to build long-term wealth — say, for something like college — investing is a tried-and-true way to secure a solid financial future for your kids.
The stock market gives you a chance to build wealth because it historically moves upward over time. Let’s break it down.
There’s a greater chance you can make money from your investments if you give them time to grow — thanks to the power of compounding. As your investment grows, you earn compounding returns on the money you save and the returns earned. Returns on returns = higher gains over time.
A 529 plan is an account controlled and owned by an adult — it’s used to pay for a child’s education expenses. Money in a 529 will grow tax-free, and withdrawals for qualified expenses are also tax-free. Side note: Qualified expenses are things like tuition, books, room and board and computers. (See a full breakdown here.)
A couple things to know about a 529 plan…
You’ll have to pay a fee if you remove the money for non-qualified expenses.
With this account, your investment choices are limited to a list of preset options offered by each state.
You can only have one child per account at a time. So if you’re saving for two kids, you need to open two accounts.
A custodial account is another college savings option. This is a taxable investment account opened by an adult for a child. There are two types: Uniform Transfers to Minors Act (UTMA) accounts and Uniform Gift to Minors Act (UGMA) accounts.
The main difference between UTMA and UGMA? The type of assets they can hold. UTMA accounts can hold any type of asset — including property. UGMA accounts are limited to liquid assets (something that's easily converted to cash).
A few things to keep in mind about a custodial account...
Your kids can only access their assets when they turn 18 — and the money can be used however they’d like.
You don’t have to worry about withdrawal fees.
Since it’s considered your child’s asset, a custodial account may reduce their eligibility for financial aid.
With Greenlight, kids AND parents invest. You can invest for your kids’ futures — whether that’s college, a first car or any other goals. You don’t have to be a Wall Street whiz to make smart investment decisions. In your Parent Dashboard, you’ll find investing research, insights and educational content.
Some other things to know about investing with Greenlight...
Not sure where to start? We’ll give you fund recommendations based on your timeline and goals.
You don’t need a big chunk of change to invest. You can invest in fractional shares and ETFs for as little as $1.
When it’s time to put those investments to work, you can use them however you’d like — without fees or spending restrictions.
You can’t stop your kids from growing up so fast. But you can use the magic of time to make sure they grow up to be financially-healthy, happy adults. Want in? Set up your Invest Profile and we’ll help you get started.
After your one month trial, plans start at just $4.99/month for the whole family. Includes up to five kids.