Childhood (5-9 Years)

This is the time to decide type of account best fits you. Choose the one that fits you and start investing. Invest by automatic account builder, or mail.

Educational IRAs
In 1997, Congress gave parents a helping hand in investing for college expenses, by creating Education IRAs. Education IRAs allow parents, relatives, and even the youngster to contribute up to $500 annually to an investment account. This money grows tax-free and withdrawals are tax-free as long as the proceeds are used to pay for higher education expenses. There are some restrictions -- contributions are not tax-deductible as in a regular IRA, for instance.

UGMAs & UTMAs
UGMA (Uniform Gifts to Minor Act) accounts permit the transfer of investments, securities, and mutual funds to a minor account holder. UTMA (Uniform Transfer to Minors Act) accounts permit the transfer of any kind of property to that account, as well as the transfer of investment securities and mutual funds.

There are several advantages to these types of accounts -- simple account setup, no caps on maximum investments, and tax breaks for the minor. When the child is under 14, the first $600 of annual income are tax-free. Earned income between $601-1200 is taxed at 15%, and income over $1200 is taxed at the parents' rate. After the age of 14, income from a UGMA and UTMA account will be taxed at the child's tax rate.

UGMAs and UTMAs allow you to set-up accounts for minors, thereby allowing you to control their assets until they reach 18-21 years of age, depending on the minor's state of residence. Disadvantages of these accounts are the children have been known to use these funds for purposes other than college, such as cars and travel.

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