Opening UGMA Accounts: A Smart Strategy When You Have 2 Kids in College and Expenses Are Doubling

This blog post is in partnership with Responsival. As always, all opinions are my own.

So the last time I spoke about paying for college, I had one child who was graduating. Now that child is a freshman in college and my middle child is a senior in high school. As my middle kid gets their college acceptances, paying for that kid to go to college is heavily on my mind. Our costs are going to double! One thing that gives me comfort is that we have NY529 plans. But there’s another way that things can be made easier for paying for college and beyond: UGMA accounts, which stands for Uniform Gifts to Minors Act, and it’s a type of custodial account (meaning it’s managed by an adult on behalf of a minor). I’ve mentioned this before and here’s why opening UGMA accounts are a smart strategy when you have two kids in college and expenses are doubling. I did write a blog post about UGMA accounts two years ago, but this post will give you even more information.

Facing not one, but 2 college tuitions is definitely daunting. Next fall, we’ll be paying double what we paid this year. Add in non-educational expenses like:

• Transportation
• Healthcare expenses (prescriptions, medical devices, etc)
• Dorm furnishings (including bedding, organization, laundry baskets, etc…
• Clothes including new winter boots, winter jacket, college swag, extracurricular activities
• Snacks and money to go off campus for social activities

My middle child will need to fly back and forth to their university and my oldest sometimes takes the bus to NYC (but the price of that is at least $70 roundtrip now). My kids may want to go abroad to study also! Planning for these expenses helps. We also want to make sure our kids will thrive after graduation.

The main benefit of an UGMA compared to another account like a 529 is that once your child reaches the legal age of being considered an adult in your state, they can use UGMA funds for any purpose. A 529 is limited to educational expenses only or you’ll get hit with taxes and penalties. My oldest could use his UGMA account to pay for his first apartment or car, which you cannot do with a 529.

Anyone can contribute to UGMA accounts, including grandparents or other relatives. These contributions come from after-tax dollars. A UGMA account is handled differently than a (UTMA) Trust account, there are less restrictions. You should research which one is better for your child.

Related Posts:

Beyond 529s: UGMA Accounts Can Help Your Child’s Financial Future

Why We’re Not Worrying About Saving For College