My HS junior is a freelancer. She gets a regular paycheck every month. While is not much compared to our family income it still adds up. Money goes to her bank account. We will not qualify for any need based scholarships. What is the best financial approach: let her money to accumulate on her bank account or withdraw it every month? Or it is really doesn’t matter since it seems that we will be fully pay family any way?
If it doesn’t matter because your parent income is high enough that need based aid won’t happen (make sure…run some net price calculators)…then let her keep that money for other college costs…discretionary spending, and maybe books.
And an FYI…if you simply withdraw it, that won’t matter. You would have to spend it.
Withdraw it and do what with it? As thumper mentions, as long as you have it, whether it’s in a bank account or in a dresser drawer, the result is the same as far as any possible financial aid is concerned.
For example when she shops using her credit card that I pay for and then reimburse me by transferring money to my bank account.
How much are we talking here…$20 a week or $200 a week? How much shopping does she need to do?
RE: the credit card…she doesn’t need to pay YOU. She can pay her own bill. That would also get the money spent.
It doesn’t sound like she needs this money for any college purpose. Will you be giving her discretionary spending money in college? She could use it for that when the time comes.
I’m not sure I understand your concern at all. It sounds like money is no object in your family.
Wouldn’t it be easier if she paid her credit card bill each month with her money, instead of you paying her bill and then she reimburses you? But if you’re sure that she won’t qualify for any need-based aid, for financial aid purposes it doesn’t make any difference how much money she has in her bank account.
If she doesn’t need it for college, suggest that she start a Roth!
Now that’s an excellent idea. If only more young people fully appreciated the time value of money…
I don’t think we can talk about money being no object in double income middle class working family. We plan to pay for her college and she will continue working while in college.
Like you, we were a dual income family. We were able to pay the costs for our kids to attend college. BUT we expected them to pay for all discretionary spending, and books. That is what their job earnings went to fund.
If you won’t be applying for need based aid, it really doesn’t matter where this money is. If you do apply, 20% of the account balance of your daughter will be added to your FAFSA EFC. So…if she has $10,000 in the bank, that will add $2000 to your EFC.
i think funding a Roth with some of the money is an excellent idea.
The other thing she could do is put a chunk in a 529. It would have to be used for educational expenses, however. 529 account balances are assessed at 5.6% which is the parent rate.
If this is a few thousand dollars, and you are funding all college costs, I would let the student use this for her spending money…which will save you something in the long run.
Roth is a good idea, however, there is a contribution limit.
Well, of course. But I assume the kid would like some access to most of the money before retirement anyway, so doubt the kid would max it out. She may want it for stuff like apartment security deposits, first cars, etc. I happen to have been thinking about this today because D2 is in the interview process for some Silicon Valley summer internships, and appears to be getting close to a couple of offers. I suspect she will have some money left over, and after she buys the smart phone she has been craving (mean old mom, me, hasn’t gotten her one – I just gave in and got one for myself last month!), I still think she would have enough left to put a few thousand in a Roth. Her sister, age 25, started one first year out of college and plugs away at it after getting her 401K match. Maybe my speech about not counting on much inheritance due to paying for expensive colleges is getting through! 
Can a Roth be started at any age?
@seal16 Is your daughter reporting her self-employment income on her tax return each year (Form 1040, Schedule C) and paying tax?
There is no lower end age limit legally as long as the kid has earned income. I don’t know if any financial institutions put their own limitations on, though.
Some places won’t take IRA money from minors. I found one 20+ years ago to take my toddler’s IRA money (had a W-2).
Your toddler had a W-2? Hmm… modeling? What else could a toddler do for earned income?
Acting
It has been less then a year since she got this job. So 2014 will be the first year when her or us(I did not figure it out yet) have to pay taxes.
You can pay it for her but she has to file her own return (s).