Should I Open a UTMA Account for My Child?

Summary

Podcast Summary: Ramsey Everyday Millionaires
Episode: "Should I Open a UTMA Account for My Child?"
Date: November 19, 2025

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Overview

In this engaging Q&A, the Ramsey Network hosts answer Emily’s question from Atlanta about whether to open a UTMA (Uniform Transfers to Minors Act) account for her four-month-old son. The discussion dives into the pros, cons, and alternatives to UTMA/UGMA accounts, the best ways to prepare financially for a child’s future, and the Ramsey Network’s favored strategies for managing and gifting wealth to children responsibly.

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Key Discussion Points & Insights

1. UTMA/UGMA Accounts: Risks and Loss of Control

• UTMA/UGMA accounts are custodial investment accounts opened in a child’s name.
  • Once the child reaches the legal age (typically 18 or 21, depending on state law), they gain full and unrestricted access to the assets, regardless of how responsible or mature they are.
  • This loss of parental control is a major concern for the hosts.

Quote [01:04] - Host:
"Here's my thing. And this is not a knock against your financial advisor. I'm personally not a fan of the UTMA and UGMA accounts because that money is legally that child's money. So you lose control completely."

• Potential for large sums: Over 18+ years of investing, account balances can grow significantly, which could be overwhelming or misused by a young adult.
  • Quote [01:25] - Co-host:
    "If you start throwing like 100, 200 bucks in a month ... you could be handing over, I mean tens, hundreds, thousands of dollars. Yeah. Depending on how much you put in there and how much growth."

2. Alternative Strategies

• Roth IRAs for Teens:

  • Parents can open Roth IRA accounts for their children once they have earned income (e.g., from a part-time job as a teenager). This teaches them to invest and benefit from compounding early.
  • Quote [02:10] - Co-host:
    "We started when we started working and actually could file a tax return ... They opened up a Roth IRA once you have earned income. ... Even just that, me opening that as a teenager versus even my husband when he opened his, when he was like 23, you know, starting to work — like even that year of difference."

• 529 College Savings Plan:

  • Recommended as the primary vehicle for education savings due to its tax advantages and parental control.
  • Each child can have an individual 529, which is owned by the parent, not the child.

• Non-retirement Brokerage Account (Parent-Owned):

  • For expenses beyond education (like weddings, house down payments), the hosts suggest using a regular brokerage account owned by the parent.
  • This gives parents full control and flexibility to gift the money later, under the annual gift tax exemption.

  Quote [02:44] - Host:
  "I'm going to do a 529 plan for each kid, invest there, and then if I want money beyond that for, let's say a wedding or a house down payment, I'm just going to do that in a non-retirement brokerage account that I have control over."

• High-Yield Savings for Smaller Goals:

  • For goals like a first car, the recommendation is to use a simple, high-yield savings account and cash flow the purchase when needed, involving the child in the process.

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Notable Quotes & Memorable Moments

• On Ceding Control of Assets:

  • "That money is legally that child's money. So you lose control completely."
    (Host, [01:04])

• On the Size of Custodial Accounts:

  • "You could be handing over, I mean tens, hundreds, thousands of dollars."
    (Co-host, [01:25])

• On Early Investing:

  • "It's crazy even just that me opening that as a teenager versus even my husband when he opened his, when he was like 23 — even that year of difference."
    (Co-host, [02:10])

• On Involving Kids in Major Purchases:

  • "I'd just have a high yield savings account and you guys just kind of cash flow it when the time comes."
    (Co-host, [02:41])

• On Parental Fears of Handing Over Money:

  • "Are you prepared for Mia and Henry to just be crazy hellions that you're like, I can't give you any money. I don't trust you. My fear. Is that what you're fear?"
    (Co-host, [03:12])

• On Breaking the Family Trend:

  • "That kid's going to be unbelievably wealthy. That's changing your family trend."
    (Host, [03:32])

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Key Timestamps

• [00:29-01:25] — Emily's question, UTMA/UGMA explanation, concern over loss of control.
• [01:25-02:10] — Discussion on account balances, alternatives like Roth IRAs.
• [02:10-02:44] — Benefits of early investing, favoring 529 and brokerage accounts.
• [02:44-03:07] — Gifting strategies, maintaining control with parent-owned accounts.
• [03:12-03:32] — Parental anxiety around handing over large sums, affirmations for proactive planning.

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Conclusion

The hosts strongly prefer maintaining parental control over assets meant for children until they’ve proven financial responsibility. Their recommended approach is to use 529 plans for education, Roth IRAs for working teens, and parent-held brokerage or savings accounts for other major expenses — gifting funds when appropriate rather than automatically handing over control at a fixed age. Their practical advice is geared toward both growing family wealth and raising financially savvy kids.

Transcript

[A]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Emily is up next in Atlanta, Georgia. What's going on, Emily? Oh, your phone's all busted. Emily, can we hear you?

[B]

I can hear you. Can you hear me?

[A]

Yeah, we're good now.

[B]

I'm so sorry. Thank you so much for taking my call.

[A]

Sure. What's your question?

[B]

I have a four month old son that we have started a 529 plan for. But I was speaking with my financial advisor a little bit ago and she recommended a UTMA or UGMA account. I was just wondering what your thoughts were on possibly putting some money in a UTMA account like to pay for maybe like their first car or something like that, or if I just should put all that money towards 529.

[A]

Awesome question. How old are the kids?

[B]

I just have a four month old son.

[A]

Oh, sweet. Okay, so we got plenty of time. This is the best time to open up an investment account. Here's my thing. And this is not a knock against your financial advisor. I'm personally not a fan of the UTMA and UGMA accounts because that money is legally that child's money. So you lose control completely.

[B]

Okay.

[A]

And there's no way to restrict. Yeah. Once they turn 18 or 21, depending.

[C]

On the state law, it's basically like opening an investment account in their name. But the UTMA is the umbrella covers it, shields it from them until they're 18. So what George is saying is if you start investing, investing can be crazy over 18 years. If you start throwing like 100, 200 bucks in a month, I mean that stuff can just. It could be a lot of money for an 18 year old. So George is just saying caution because you could be handing over, I mean tens, hundreds, thousands of dollars. Yeah. Depending on how much you put in.

[A]

There and how much growth.

[C]

But yeah. So for a car and stuff. I probably wouldn't honestly now. Mom and dad, they did for us. We started when we started working and actually could file a tax return and all of that. They opened up a Roth IRA once.

[A]

You have earned income.

[C]

Yeah. And that was more when we were teenagers. But that kind of thing is so helpful because it's crazy. Even just that me opening that as a teenager versus even my husband when he opened his, when he was like 23, you know, starting to work, like even that year of difference. So there's ways to definitely set them up well to get some things going. Like a roth or the 529 as well. But things. Yeah for them purchases like a car and that kind of thing, Emily. Honestly I would probably have them involved in it. I would just have a high yield savings account and you guys just kind of cash flow it when the time comes.

[A]

What I would do and what I am doing Emily, for my kids is I'm going to do a 529 plan for each kid, invest there and then if I want money beyond that for let's say a wedding one day, a house down payment to give to them, I'm just going to do that in a non retirement brokerage account that I have control over that makes me feel a whole lot better than.

[C]

And you can just gift it if it's not beyond the gift tag, right? Yeah, you can gift it to them.

[A]

Yeah.

[C]

And it's not under their name at.

[A]

18 so that's a safer bet. I like the plan of 529 for college. Let's make sure we get that.

[C]

Are you prepared for Mia and Henry to just be crazy hellions that you're like I can't give you any money. I don't trust you. My fear. Is that what you're fear?

[A]

What kind of kids will I raise?

[C]

What are you going to raise, George?

[A]

Likely they'll be so frugal. They'll be like dad, we're not. That's so much money. I'm like I raised you right. Kid is due, right?

[C]

It's a great question though Emily. You're a good mom to be asking for a four month old.

[A]

Especially for a four month old. That kid's going to be unbelievably wealthy. That's changing your family trend.

[C]

Well done.

[A]

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