My daughter just turned 15 last month, and I’ve started looking into getting her setup with some sort of bank account. I was originally thinking about a checking account, as I really wanted her to be able to use a debit card (I know, against Clark’s 10 Commandments, but she can’t get a credit card at 15), and also be able to put the checks she gets for birthday/Christmas into her account, in order to start teaching her about saving and spending, and being responsible with her money. While looking, I came across this Fidelity account (linked below), that is a combination (at least, appears to be), savings/checking, and also a brokerage, with some sort of parental controls.
This looks like a fantastic choice, would allow for what I was looking for, but one requirement I had, is that I wanted to be able to transfer money from my account to her account, instantaneously. The problem is, I do not currently have a Fidelity account (I currently bank with Schwab, and don’t really want another account to keep track of, as I also have a small account with a local bank I use for all the things I don’t want to be able to touch my real money - Venmo, PayPal, etc).
With all that rambling out of the way, are any of you using this type of account with your kids? How do you transfer money to your kids account? I see there is some kind of Venmo integration, and am wondering if maybe I am able to Venmo her money that way, and have it instantly available in her Fidelity account, or if there is the standard 1-2 day transfer time between Venmo and her account? I asked my Schwab Financial Advisor if they had a similar account, which they don’t, but she was very interested in hearing about it when I told her…so maybe it won’t be too long until they offer something like that.
When my kid was going to school out of state, I transferred money from my BOA Account to our joint (his).
Now he is working outside the Country, we have 3 USAA Accounts, Mine, His, and a joint which we refer to as the Transfer Account. We keep $1 in the Transfer account to keep it open.
I email whenever I make a Transfer.
Works for Gifts etc.
For my family, having a local branch is important for teaching the kids about how financial institutions work. One kid picked a local bank, and the other picked a credit union. Both opened accounts in person, selected the type of access they wanted (i.e., debit card or not), and then set up online access on their phones. They can easily make cash deposits in person, and checks can be deposited in person or online.
I don’t typically need to transfer money to them immediately, so ACH transfers from my own account (or Venmo) work just fine. I have an Amex card in one kid’s name that is linked to my account, and that I can turn on and off and set spending limits for. It’s handy for when we need something picked up from the grocery store, and for emergencies (so far only happened once, which was heavily scrutinized by the parents). It’s about time I get one of those for other kid.
Interesting, never thought about a joint account. That would make transferring easier, I’d think. I might have to research that one a bit. I’m not sure which would be better, and account by themselves or a joint. The local bank does sound like a good option too, and I could just have her get one setup at the same local bank I use as well.
I do know that there are some Fidelity investments my dad would like to gift to the kids, so that is another incentive to going with the Fidelity account, although I’m not sure if the tax implications of that right now…
If he gives them securities, the securities retain their tax basis. If your kid sells after he plus the kid have held the funds more than one year, the kid will owe long-term capital gains tax, probably at a rate of 0%. It’s a great way to give to kids and people with low income. I gave my oldest a mutual fund to sell for a house downpayment that way. I would have had to pay 15% capital gains tax on the appreciation, but she paid 0% because her other income was much lower than mine. If they sell before the funds have been held for one year, they will owe short-term capital gains tax, which is the same rate as regular income tax.
Kids who are claimed as dependents have lower income limits before capital gains taxes kick in, I believe. I don’t know the particulars.
Thanks for the info. Isn’t the Kiddie Tax an issue here? I thought under something like $1-2k, there would be 0 tax, but any more than that, and it’s taxed at the parents rate? May be mistaken, we’ve tried to look into this for a couple years now and have just not done it yet. Would probably be wise to sit down with someone…
Yes. Looks like $2,300 is the limit that would be at 0% tax. Keep in mind, that’s gains only. So if grandparents give a kid $4,000 worth of securities with a basis of $2,000, kid could still sell all of it with zero tax. If grandparents want to give more than that, kid could sell a portion each year to stay under the limit.