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Give Your Kids a Financial Head Start with a UGMA Investment Account from Fabric by Gerber Life

3 min read
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Getting an early start is key to building a strong financial base for the future. That's why setting up a UGMA account for your child, like the one from Fabric by Gerber Life, is a worthwhile investment. There are many questions you probably have about UGMA accounts—what they are, how they work and, most importantly, what benefits they can provide for your child.

What Is a UGMA Account?

Let’s tackle the basics: What does UGMA stand for, and what does this type of investment account do? UGMA stands for Uniform Gift to Minors Act, and it’s an investment account that serves as a financial tool allowing parents to invest on behalf of their child.

Essentially, you can set up a UGMA account for your child, set a daily or monthly contribution amount, and manage assets like stocks, bonds, mutual funds or exchange-traded funds until the child reaches adulthood, leveraging our experienced SEC-registered partners1 to help those contributions grow. Then, when your child reaches an age of majority (typically 18 - 21, depending on the state), the account will automatically transfer to them—with no additional paperwork required. This means all of your UGMA contributions will directly benefit your child, giving them a strong financial foundation to build from when they are old enough.

Are UGMA Accounts Taxable?

There are a number of tax benefits associated with a UGMA account that can help keep money in your child’s account. The main benefit comes from tax rates: Typically, the first $1,150 is tax-free, and the next $1,150 is taxed at the child's rate. In many cases, this means earnings may be completely tax-free or significantly less than a standard investment account.2

How Do UGMA Accounts Work and What Can They Be Used for?

When you set up a UGMA account, you'll create an online profile to help manage your investments, select risk-tolerance levels and adapt your investment portfolio as your child gets older and your financial situation evolves. Investors can contribute as little as $1 per day with automatic contributions to grow assets with ease. For the account to remain open in good standing, the custodian needs to contribute a minimum amount of $20/month, excluding administrative fees. The cost of an account for one child is only $3/month, while multiple accounts will incur a $5/month flat fee total. Share your child’s unique gifting link with friends and family—they’ll be able to send personalized gifts for birthdays, holidays or just to contribute to your child’s future. No more broken toys or clothes they’ll outgrow!

How Is a UGMA Account Different from a 529 Account?

The main benefit of a UGMA account over standard college-savings accounts (such as a 529 Savings Plan) is flexibility. A 529 account can only be used for education expenses (or, in specific circumstances, retirement savings), whereas funds from a UGMA account can be used for a much wider range of expenses. Your child could use their UGMA funds for education costs, a down payment on a home, a laptop or just savings in case of emergency.

Why Should I Choose Fabric by Gerber Life?

If you want to set up a long-term investment plan for your child with the support of a trusted brand, then Fabric by Gerber Life is a great way to make that leap. You’ll also have peace of mind knowing these accounts are SIPC-insured up to $500,000.3 Learn more about a UGMA account from Fabric by Gerber Life, and we'll help you make the financial decisions that will best benefit your child.

As a busy parent, you want to give your kids a head start on their financial future. But investing can often be both confusing and time-consuming. Fabric by Gerber Life makes it easy for you to set up an investment account for your child that grows with them.

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1Fabric by Gerber Life is a brand of Western & Southern Financial Group, Inc. Western & Southern Financial Group, Inc. is the parent company of Fort Washington Investment Advisors, Inc. Investment advisory services tied to the Fabric by Gerber Life platform are provided by Fort Washington Investment Advisors, Inc., an SEC-registered investment advisor. Registration as an investment advisor does not imply any level of skill or training.

2Fabric by Gerber Life and its affiliates do not provide tax, legal or accounting advice. This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

3Custody, brokerage, and clearing services are provided by Apex Clearing Corporation, a registered broker-dealer and member FINRA/SIPC. As a member of the Securities Investor Protection Corporation (“SIPC”), funds are available to meet customer claims up to $500,000, including a maximum of $250,000 for cash claims. For additional information regarding SIPC coverage, including a brochure, contact SIPC at (202) 371‐8300 or visit www.sipc.org.

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