THIS ACCOUNT(UGMA) | OTHER ACCOUNTS(i.e. Savings Accounts) |
Grows through investments (i.e. in stocks, bonds, ETFs), providing the potential for higher returns |
Grows with fixed interest rates, providing limited growth potential |
Re-invests money that you gain, allowing earnings to compound over time |  Adds interest that you gain to your balance |
Has lower tax rates for minors |
Subject to ordinary income tax rates |
How can I grow my child's investment through compounding?
Compounding is the process where your kid’s investment grows over time as returns are reinvested, allowing them to earn returns on both the original contributions and the accumulated growth. The more you contribute, the greater the potential for compounding to build your child’s financial future.
There are multiple ways to contribute to the account:
Custodian contributions: As the account custodian, you can make one-time or recurring contributions.
Gifting from friends and family: Loved ones can also contribute to your child’s account through a personalized gifting link. They can choose to make one-time or recurring gifts.
By consistently contributing to the account, you maximize the power of compounding and help set your child up for a strong financial future.
Learn more about contribution options here.
Want to learn more? Check out these articles on other common questions:
Investments involve risk of loss. Fabric by Gerber Life and its affiliates do not provide tax and accounting advice. This material has been prepared for informational purposes only, and is not intended to provide tax and accounting advice. You should consult your own tax and accounting advisors before engaging in any transaction.