Personal Finance

I have a UTMA account with $60k sitting in it for my son and I'm worried that 18 years old is too young to have access to that much cash

Marc Guberti

Published: January 4, 2025 10:13 am

Saving money for your child’s future is a noble goal for any parent, but the time eventually comes when money switches hands. UTMA and UGMA accounts go to the child when they are 18 or 21 years old, depending on the state.

A Redditor has been educating their child about money while contributing to a UTMA account, which is currently valued at $60,000. While the child has a great start, the Redditor is worried about giving that much money to their child that early. The individual wrote a post about it and shared it with the fat FIRE community.

I’ll share my thoughts, but it is always good to speak with a financial advisor if you can.

Educate Your Child About Personal Finance

Your child will eventually have access to a high amount of money. They’ll have to get a job or start a business to make ends meet. They will have to make decisions with their investments, savings accounts, and other resources.

Teaching your kids about personal finance can prepare them for when they can access the UTMA funds. The Redditor appears to be doing well in this regard. The individual has been teaching their child about personal finance and the power of compound interest.

You can read books, listen to audiobooks, watch YouTube videos, and consume educational content. While learning new things about personal finance, you can have more conversations about money and investing with your child. Get them to understand the value of the dollar and how it can grow over time. Most schools don’t do that part.

Trust the Kid With Some Money Now

If you are nervous about giving your child a large UTMA, you may want to entrust them with some money now. The amount you entrust to your child varies based on your financial situation, but any amount from $100 to $1,000 can go a long way.

That’s enough money to put into a brokerage account and see tangible results. If your kid can responsibly handle $1,000, then they are more likely to responsibly handle $60,000. 

Highlight the Risks of Deviating from the Course

Dipping into a UTMA may seem tempting, and that’s one of the concerns the Redditor points out. The individual feels confident in their child’s financial responsibility, but with a sudden $60,000 windfall, some people may be tempted to pull some money out of their investments.

The parent has already done well by teaching their child about compound interest. However, you can also use this exercise to demonstrate how much you can lose in the long run.

If a child in this situation takes $5,000 out of their UTMA, they lose far more than $5,000. If the funds achieve an annualized 8% return, $5,000 would turn into $108,662.61 in 40 years. 

Therefore, a child who pulls $5,000 out of their UTMA account is missing out on $108,662.61 in their retirement portfolio. Retirement may seem far away, but you can bring up closer goals, such as buying a house or raising a family. Saving up for closer goals that precede retirement can keep children focused on saving money instead of plowing through their UTMA funds.

Monitor Your Child’s Portfolio

Even when your child receives access to their UTMA, it’s still good to stay on top of their investments. You should periodically ask your child what they have been doing with their portfolio and their thoughts on investing. If you have had plenty of money conversations leading up to the UTMA transfer, these conversations will feel more comfortable for both of you.

You can also serve as your child’s mentor during market volatility, FOMO rallies, and other events that take place in the stock market. Financial education is the best way to ensure your child makes good decisions with their UTMA funds. 

If possible, continue to check in on your child’s portfolio at least once per month until 25. Why that number? It’s typically when the human brain is fully developed.