Will my kids' investments cut their college aid?February 2, 2013: 6:30 AM ET
I've opened custodial accounts to teach my kids investing. Will that cut their college aid? — Rick B., Austin
Assuming you're otherwise eligible for need-based aid, then yes. Each of your children will be expected to contribute 20% of any money in a bank or brokerage account in her name every year. In contrast, you, the parent, will have to chip in at most 5.64% of your financial assets annually. And most schools will ignore certain assets, such as your retirement accounts and the value of your primary residence, says Kal Chany, author of Paying for College Without Going Broke.
So for future investments, open a brokerage account in your name and work with your kids to choose which stocks or funds to buy. A side benefit: The setup will give your children a lesson in the intricacies of paying for college.
— Zain Asher
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