I have 5 kids and can't pay for their college. I decided not to do a 529 plan, and here's how we are helping them out instead.

• Our families didn't salary for my and my husband's college.
• We person 5 kids, ages 13 to 4, and we cognize we can't afloat salary for their college.
• Instead of going pinch 529 plans, we went pinch UTMA custodial accounts instead; here's why.

When my hubby and I were increasing up, our families told america early connected that they would not beryllium paying for america to spell to college.

We afloat understood. Neither of america has a able background. Both our sets of parents joined young and nary of them completed degrees themselves.

With parents adjacent retirement, a highly adaptable self-employment income, and 5 kids of our own, our memories of moving our measurement done schoolhouse are nary excessively dimmed. Those degrees were hard-earned, and while our families supported america to nan champion of their abilities, nan money portion was mostly near up to us.

With a middle-class income, we are nether nary delusions that we'll beryllium able to salary for everyone's schooling outright, yet our desire is to support our children, who are ages 4, 6, 8, 10, and 13, group themselves up for success.

When astir families deliberation of education savings, they image a 529 plan. Instead, we chose custodial accounts nether nan Uniform Transfer to Minors Act, aliases UTMAs, for our kids.

A 529 savings plan allows you to prevention money for a beneficiary, your child, and usage it to salary for acquisition expenses. You tin salary for tuition, but besides boarding, and books. Some parents usage it to salary for backstage schoolhouse earlier their kids are disconnected to college.

A UTMA custodial account is managed by nan parents until nan kid is either 18 aliases 21, astatine which constituent they summation afloat power of nan money. They tin usage it to salary for assemblage aliases make large investments specified arsenic buying a car. The accounts tin incorporate money, existent estate, good art, and moreover patents.

Here's why we decided UTMA accounts were champion for our family situation.

In a UTMA custodial account, money belongs to nan child

It's important for parents to understand that nan costs successful a UTMA relationship are legally considered nan child's property, Andy Esser, a financial advisor astatine investing patient Edward Jones, said.

On nan positive side, this position "could supply immoderate protection from nan parent's creditors," Esser told Business Insider. This doesn't norm retired 529 plans, which tin beryllium group up pinch either a genitor aliases a kid arsenic nan ineligible owner; additionally, immoderate states do connection creditor protection for 529 funds.

While you mightiness dream to skip property probate pinch a UTMA account, Esser notes that's besides not wholly true. If nan custodian dies, a caller 1 must beryllium appointed, and if nan insignificant dies, nan relationship typically becomes portion of nan minor's estate.

UTMA accounts are flexible

While 529 plans must beryllium utilized for education-related expenses, nan options for UTMAs are overmuch broader. The superior stipulation is that custodians cannot walk money connected themselves; nan money must beryllium spent connected thing that straight benefits nan child.

Benefits whitethorn see basal support costs, specified arsenic healthcare, aliases they tin beryllium big-ticket items. With UTMAs, our kids could bargain their first cars, study abroad, put down payments connected their first apartments, aliases moreover get married.

That said, immoderate investments that UTMA accounts make that consequence successful income earned intends that nan income supra $1,300 is taxable, and nan kid aliases guardian will beryllium responsible for paying those.

UTMA accounts fresh amended pinch our parenting philosophy

We're not fierce savers, and having lived done a marketplace crash, we don't for illustration having excessively overmuch money tied up successful accepted investments, either.

Special needs tin beryllium accommodated

One of my children has dyslexia and dislikes accepted schooling. The elasticity of a UTMA relationship intends that we tin see each of our children arsenic without nan anticipation that everyone will take to spell to college.

That said, UTMAs do person a bigger effect than 529 connected assemblage financial assistance eligibility.

UTMA accounts are affordable

After our youngest was born, I was wished to commencement immoderate benignant of savings for each of our kids, nevertheless small. In a reliable quarter, they'll each beryllium getting nan $25 monthly minimum, and successful amended seasons, I'll put by immoderate other I can. If extended family members wish to lend also, our brokerage accounts make it elemental for them to do so.

Like 529 plans, UTMA relationship contributions are post-tax, meaning that income taxes person already been paid connected nan money being deposited. For moderate-income households for illustration ours, however, wherever location is nary volition to group speech tens of thousands of dollars per account, a UTMA relationship is elemental to unfastened and inexpensive to support running.

We recognize 529 plans would springiness america much nonstop power complete our children's spending, but sooner aliases later, they're going to person to turn up. A UTMA relationship is conscionable 1 of nan devices we dream will thief them do that.