As a parent it’s easy to get bewildered by the choices available when setting up a savings plan for your kids. Make the right choice and you’ll get a plan that aligns with your priorities. It could be you need to keep your options open — education is always a priority, but so are other things for your kids. Like a first car, apartment, or wedding. Or maybe you are focused on reducing your taxes. Each of the plans described below has its own strong points. Let’s dig in and understand which is right for you.   

UTMAs — The best choice for the majority of parents 

A UTMA account, like those offered by UNest, is a tax-advantaged custodial account for kids that enables parents and other family members to invest and save for more than just college.

Funds in the UTMA account can be used for future goals such as but not limited to buying a first car, down payment on the house or a wedding day. The custodian of a UTMA account can be a parent, grandparent, relative, or friend. Each UTMA account is set up and managed by its custodian until the child is of age. The custodian picks at what age the beneficiary will take control of the account. Depending on the family’s state, this is normally between 18 and 25.

The UNest Investment Account for Kids makes it easier than ever before for families to receive the benefits of UTMAs. Up to $2,200 in annual earnings in UTMA grow in a tax-advantaged way. The first $1,100 of the earnings is completely tax-free. The next $1,100 is taxed at the child’s tax rate. Anything exceeding $2,200 is taxed at the parents’ tax rate. This threshold is applicable to gains in the account and not to the original contributions.

529s — loaded with restrictions and penalties 

A 529 plan is a tax-advantaged savings plan that encourages parents to save for their child’s future education costs. 529 plans are offered by states, state agencies, or educational institutions. Each state sponsors at least one type of 529 plan. If you use the funds in your 529 for anything other than education you lose your tax advantages and the earnings portion is subject to a 10% penalty. You can invest in almost any state 529 plan, not just your own state’s 529 plan. 

A 529 can be used to pay for college costs at any qualified college, nationwide. In most plans, your choice of college is not affected by the state that sponsored your 529 college savings plan. For example, You can be a California resident, invest in an Oregon plan, and send your child to college in Texas. 

What are the key differences between UTMAs and 529s?

Both 529 plans and UNest UTMA custodial accounts provide a tax-advantaged way for parents and others to help save for a child’s educational expenses. As a UTMA, UNest’s Investment Account for Kids offers a significant benefit to parents that are looking for a flexible way to save for all the future life stages your child will experience. This may or may not include education. This flexibility is important since your kids may receive financial aid or scholarships. Or, they may end up not going to college at all.

In a 529 plan if you use the funds you have saved on non educational expenses you lose your tax advantages. Plus, the amount you have made in earnings is subject to a 10% penalty. Additionally, a UTMA like the UNest Investment Account for Kids is not associated with any State, while 529s are sponsored by the state with each of 50 states confusingly offering its own plan. 

Lastly, in a 529 the investment choices are limited to mutual funds and ETFs, and your asset allocation can be only changed twice a year. In UTMAs parents can pick individual stocks, alternative investments and even crypto currency. This offers more control on your portfolio allocation throughout the year. 

What is a Coverdell ESA plan?

According to Investopedia, “A Coverdell education savings account is a tax-deferred trust account created by the U.S. government to assist families in funding educational expenses for beneficiaries who must be 18 years old or younger when the account is established. While more than one ESA can be set up for a single beneficiary, the total maximum contribution per year for any single beneficiary is $2,000.”

Is a Coverdell ESA the same as a 529?  

Up until a few years ago Coverdell ESAs held a distinct advantage of 529s in allowing parents to use the funds they saved for a broader range of education costs. Whereas 529s could only be used for college-related expenses, a Coverdell ESA’s funds could also be applied to other education fees such as private High School. This distinction was eliminated by the Tax Cuts and Jobs Act. ESAs do still offer more options in where a consumer opens an account and the types of investment they contain. This can include individual stocks and bonds, mutual funds and exchange-traded funds (ETFs), and real estate investment trusts (REITs).

Which is better –Is a 529 or Coverdell ESA or UTMA better?

For the majority of families a UTMA account like the UNest Investment Account for Kids easily makes the most sense. In contrast to 529 and ESA plans that can only be used for qualified educational expenses, you can use the funds you invest in a UTMA for any expense that benefits the child named on the account. 

If an account holder uses funds from a 529 plan for non-education related expenses, they lose their tax advantages and earnings are subject to a 10% penalty. Parents using UTMAs have the flexibility to plan and save ahead for all the important life stages that their children will experience — college, first car, or a down payment on the home. In addition, parents have more control of what they can save and invest in, while investment choices in 529 and ESA accounts are very limited.

529s and Coverdell ESAs also confront parents with voluminous amounts of paperwork. The whole process of setting up a 529 account takes an average of eight hours, with only a limited chance that the selected program is aligned with their requirements and situation. In contrast, the UNest Investment Account for Kids makes it easy for families of all income levels and backgrounds to set up and manage savings and investment plans for their kids. 

UNest Investment Account for Kids holders can also receive gifts for their children’s UNest accounts from family and friends via the UNest mobile app, or from companies like blue chip brands such as Disney+, AT&T, Levis etc through the UNest partner program.


College Savings Calculator is a hypothetical tool that demonstrates how monthly contributions, age-based asset rebalancing, and tax savings may impact the long-term value of your account, and do not take into account a portfolio’s underlying investment management fees. Calculations assume the private institution cost inflation is 2.8%, public out of state cost inflation is 3.9%, public in state cost inflation is 2.7%. Portfolio is assumed to have only stocks and bonds. Monthly equity returns are based on the historical data from the 10-year track record of the stock market (SPY). Monthly fixed income returns are based on the historical data from the 10-year track record of the bond market index (AGG). The current college expenses are provided by the Actual account performance may differ due to market fluctuations, changes in recurring investments, and asset allocation. The information provided here is for illustrative purposes only and does not represent actual or future performance of any investment option and is not intended to predict or project the investment performance of any security or index.

Ksenia Yudina, CFA, MBA

Founder and CEO

Ksenia is the Founder and CEO of U-Nest, the first mobile app that makes it easy for families to save for college. As an entrepreneur and finance professional, Ksenia has focused on alleviating the impact of student debt on families across the economic spectrum. Previously, Ksenia was a Vice President atCapital Group/American Funds, the largest 529 provider in the U.S. In this role, she played a leadership role in helping parents plan and manage their finances, with a focus on the future well-being of their children. Prior to Capital Group/American Funds, she was founder of a residential real estate company. Ksenia earned her bachelor’s degree in finance from CaliforniaState University Northridge, and an MBA from UCLA’s Anderson School of Management.

Mike Van Kempen

Chief Operating Officer

Mike joined U-Nest in September 2019 as COO. He was previously at Acorns, a financial wellness platform, where he spearheaded the analytics and growth initiatives. Mike successfully expandedAcorns’ paid acquisition strategy, adding over 4.5 million investment accounts. Mike began his career in strategy & analytics at Belly, a Chicago-based loyalty startup in 2012. At Belly, Mike led projects that fueled growth across all aspects of the business, growing the customer base from1,000 to over 11,000 merchants, and accumulating a membership of over 2 million customers.Mike holds a B.B.A. in Finance from Loyola University of Chicago.

Steve Buchanan

Chief Technology Officer

Steve has over 20 years of experience in delivering digital innovations in the financial sector. Steve previously orchestrated product architecture and innovation as a Solutions Architect/ Fintech consultant at Union Bank. Prior to Union Bank, he was Chief Architect and Director of Engineering at Calypso, a Silicon Valley startup, where he architected and built multiple financial solutions. He was also Head of Global Integrations at Globe One in Vietnam where he integrated its Peer-to-Peer lending products into core banking solutions. Steve also built the first ever electronic Equities &Equity Options trading systems for Scottish stock brokers Wood Mackenzie (acquired by CountyNatWest). He is a graduate of Edinburgh University.

Peter Mansfield

Chief Marketing Officer

Peter has built an impressive track record in multiple financial industry segments including payments, credit/prepaid cards and lending. He has played an instrumental role at a succession of financial industry leaders, co-founding companies such as Brand3 (acquired by American Express) and PropertyBridge (acquired by Moneygram), and, as the early stage marketing lead at Marqeta (where he was team member number two), BillFloat and WallabyFinancial (acquired by Bankrate).He has helped fast-growth companies reach an aggregate market value of close to $8 billion. Peter holds a bachelor’s degree in economics from the University of Angila, UK.

Sonya Kidman

Client Relationship Manager

Sonya Kidman is a Customer Success professional with a decade of experience in advocating for consumer through user research and genuine empathy. Sonya specializes in user behavior and regularly attends national and global training sessions in wellness and people analytics tools. Sonya is a true global citizen was born in Russia, grew up in Israel, lived and worked in Canada and NewZealand. That global expertise along with an undergraduate degree in Sociology from Tel AvivUniversity have helped to shape a bullet-prof Sonya's framework to develop a winning customer strategy.

Frank Mastrangelo

Board Member

One part banker and one part technologist, Frank spent his early days with the Annenberg Foundation and PNC Bank. His career path led him to Jefferson Bank, where he led the build-out of its electronic banking platforms, and where he would forge a powerful alliance with The Bancorp co-founder Betsy Z. Cohen. As President and COO of The Bancorp from its inception in 1999 Frank played a critical role in helping the organization become an industry bellwether for branchless financial services and a global leader in payments. For this, he has become a widely respected fintech expert, and thought-leader. Frank was recognized in 2013 by Banking Innovation, a leading industry journal, as an “Innovator to Watch.” and as one of the innovators shaping the future of banking. Frank is a graduate of West Chester University of Pennsylvania.