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Why does saving in my child’s name hurt his ability to qualify for financial aid?
You may be tempted to start an investment account in the child’s name for his college savings. Unfortunately, saving in your child’s name or transferring your assets over to him will likely hurt his chances of getting financial aid. That’s because when a college's financial aid staff figure out how much you and your child can be expected to contribute to college expenses, they expect you to spend about 6% of your money to pay for your kid’s tuition and related costs. Your child, on the other hand, is usually expected to use about 35% of his or her money to meet college costs. It’s usually better to save the money in your name, not your child’s. One last point: If you put the money in the child's name, he can take legal control of the money at age 18 if you save under the Uniform Gift to Minors Act (UGMA), or age 21 if you use the Uniform Transfer to Minors Act (UTMA). Can he really manage that much money?Return to Questions
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