The Change-up 7.22.2024: Saving for your Kids
Austin Coley, CFP?, CAP?
Providing private wealth strategies & exit planning to business owners | Money without Purpose is Pointless
Happy Monday!
I hope you enjoy this edition of The Change-up, my weekly newsletter sharing the latest market news and personal finance tips. If you're interested in learning more about working with me, reply to this email or click my Calendly link at the bottom.
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Note of the Week
After offering 401k services to current clients for over two decades, we are now expanding our retirement plan offering to non-clients! If you're a business owner with a 401k plan, I'd be happy to provide a second opinion to see if there are better alternatives for your company.
Song of the Week
The Story
The Nasdaq stumbled hard last week, posting its worst day since 2022 on Wednesday after negative statements from both Biden and Trump on semiconductor chips. Joe Biden dropped out of the 2024 Presidential race yesterday. Markets responded this morning with a shrug, as all indexes are positive as of 9:30 am.?
My View
Higher interest rates have been a big obstacle to small and mid-sized companies over the last 24 months, especially since most of these companies rely on debt to fund operations and R&D.?
But that might be turning around.?
With inflation coming down and the Fed expected to cut rates at least twice during the second half of the year, the Russell 2000 (a good gauge of the small/mid sector) jumped significantly over the last 10 trading days. It had been slightly negative YTD.?
This is a stark contrast to 2024 we've grown accustomed to, with big tech (especially NVIDIA) leading the charge. NVIDIA is driving over 1/3 of the S&P 500s growth YTD for goodness sake!
Hopefully, the past two weeks are a sneak peek at the last five months of the year. We need a broader market.
Coming Up This Week
When we think of saving money for our kids, our first thought is usually a 529. This can be extremely effective when saving for future education, but restrictive for almost everything else.
But what about first cars? Weddings? Downpayments on homes? Where should we turn to save for these?
Enter the UTMA.
The Uniform Transfers to Minors Act (UTMA) is an account that allows a minor to take ownership of money, but have an adult manage the funds on their behalf until they turn the age of majority (usually 18 or 21). Money inside of a UTMA can be invested for the benefit of the child and can be distributed to pay for their expenses (like a car!).?
While this account does provide more freedom, it also has potential shortfalls. The minor receives full access to the funds at the age of majority, whether they are ready for the money or not. Meaning, that young adults can spend it on whatever without the need for approval. If you do use a UTMA to kickstart a minor's adult life, be sure to have intentional conversations as they grow and feel comfortable/responsible when the funds change over to their full possession.?
Let's have a great week!
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Prior to making an investment decision, please consult with your financial advisor about your individual situation.