Orange County Breeze

Father’s Day gifts

featured graphic for Sean Payne, Edward Jones financial analyst, during COVID-19

featured graphic for Sean Payne, Edward Jones financial analyst, during COVID-19

If you’re a dad, you may be in line to get some nice gifts on Father’s Day. But your greatest gift may be your ability to help your children. One way of doing that is to get them started in the world of investing – and making a few investments on their behalf.

Here are three possibilities:

Provided you stay within certain limits, you can also use a 529 plan to pay for qualified K-12 expenses and registered apprenticeship programs. And you can even use it to repay certain qualified student loans, within limits.

A 529 plan can affect financial aid, but its effect is generally lower than that of other assets. And as the account owner, you have control of your 529, so, if one child decides not to go to college or pursue further education, you can switch beneficiaries.

One potential benefit of an UGMA or UTMA is that some of the earnings will be taxed at the child’s rate, which is likely lower than your own. Plus, UGMA/UTMA accounts typically allow a wide range of investment choices. However, once children reach the age of majority (typically 18 or 21) they gain complete access to the money and can do whatever they want with it.

An IRA is a great introduction to the world of investing. For one thing, your child can make small contributions throughout the year, so investing in an IRA doesn’t seem burdensome. Also, since an IRA can be invested in different types of securities, your child can learn about various investment vehicles – stocks, bonds, mutual funds and so on. Plus, you can point out that, with a traditional IRA, taxes won’t be due on the earnings until your child starts taking withdrawals decades from now. (And with a Roth IRA, withdrawals are tax-free, provided certain conditions are met.)

On Father’s Day, you can show your appreciation for whatever gifts you receive from your children. But by investing in their future, you can gain some longer-term contentment.

This article was written by Edward Jones for use by your local Edward Jones financial advisor. Edward Jones. Member SIPC.

Sean Payne, CFP® can be reached at (562) 596-3722.

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