mathnerd Posted February 26, 2015 Share Posted February 26, 2015 My son participated in a contest last week and he was awarded a surprise scholarship because the founder of that organization was impressed by DS and wanted to encourage and show his appreciation. I have a check made out to his name from that organization. Since this is the AL forum, I thought some of you might have tips for me on how to save it for DS. Do you deposit it in your child's 529 account or do you have a separate bank savings account for this purpose? TIA. Quote Link to comment Share on other sites More sharing options...
HelenNotOfTroy Posted February 26, 2015 Share Posted February 26, 2015 I don't know what the tax ramifications would be for that and I don't have any personal experience with it, but the whole point of the 529 is to save without paying taxes. If you don't have to pay taxes, you could put it into a different kind of account for him, perhaps a Uniform Gift to Minors/Transfer to Minors account, or a savings bond that would mature by the time he is ready to need the money. 1 Quote Link to comment Share on other sites More sharing options...
EndOfOrdinary Posted February 26, 2015 Share Posted February 26, 2015 You are dead smack in the middle of tax season, do you use an accountant? These sorts of questions are the reason we still have one. Depending on the amount, taxes could take a significant chunk. It would merely be a quick phone call if you had a tax guy. 1 Quote Link to comment Share on other sites More sharing options...
Dmmetler Posted February 26, 2015 Share Posted February 26, 2015 So far, all of DD's have been savings bonds, so that might be something to consider. Just check the maturation date. She has a couple that will fully mature about the time she finishes her doctorate, if she stays on schedule! 1 Quote Link to comment Share on other sites More sharing options...
mathnerd Posted February 27, 2015 Author Share Posted February 27, 2015 Thanks. We do have an accountant and I will check with her before deciding on what to do with the check. It is not big money, a token amount, but still big for my 7 year old. 1 Quote Link to comment Share on other sites More sharing options...
JumpyTheFrog Posted March 6, 2015 Share Posted March 6, 2015 Savings bonds are currently paying about 0.1%, which is no better than many checking accounts. If you want it to be used for college, consider a 529 plan or ESA (educational savings accounts/Coverdell accounts). If you do a uniform transfer to minors accounts, when he reaches the age limit (18-21, depending on the state), he can take the money out and use it for anything. He'll also have to pay taxes on it as well, while withdrawals from the 529 would be tax-free. There is no federal tax deduction on 529 contributions, but many states have a state tax deduction. Another thing to consider is that if you open a 529 for him and put the money in, it might encourage you to contribute regularly yourself. We have 529 accounts with Vanguard and they autodraft each money for each of our kids. This means the money gets put in no matter whether I feel like contributing or not. Quote Link to comment Share on other sites More sharing options...
kiwik Posted March 7, 2015 Share Posted March 7, 2015 My kids just have savings accounts that pay a little extra if no money is withdrawn. Tax is different here but the bank handles the transfer of tax on interest to Inland Revenue and sends you a statement. My kids have been registered to pay rax from 10 days for other reasons anyway so that wasn't hard. Quote Link to comment Share on other sites More sharing options...
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