Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: Today’s question comes from Deb. She writes: I’d like to start a little “gift” fund for a nephew, for every birthday and special occasion, to put aside some money for him until he’s 18. What’s your best recommendation for this? A savings account, or something else?
A: Look at you, you generous aunt. There are a few options you can consider. First, you could open up a 529 college savings plan. With a 529 plan, your money grows tax-free and withdrawals are tax-free if used for qualified educational expenses. One of the big question marks with 529 plans is “What if the child doesn’t go to college?” For more on how that’s handled, head here.
You could also consider a high-yield savings account (HYSA). HYSAs are easy to set up, and you can contribute regularly. HYSAs have been enjoying some great rates recently, so this is an option worth checking out.
Lastly, you could open a custodial account. This would allow you to invest in stocks, bonds, mutual funds and other securities. With this option, the major plus is that the money could have the potential to grow more as the years go on.
MORE ON HERMONEY:
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