American college fund

auntieginzy

Hi there, As new grandparents whose grand children live in the USA (English Mum and US Dad) we would like to start a college fund for the babies. It needs to be accessible by family members who can contribute small amounts as and when. We will put the bulk in now. Would it be better to do this with an American bank or a UK one?
Help!!

whatatwit

This thread may well be moved......but it's all going to be down to exchange rates at the time of using the monies..
There is also possible future inheritance tax issues if the money is in the UK in your name.
Not sure if American resident children are entitled to UK accounts.

Pink.

Hi auntiginzy,

Welcome to MSE

You should get more help with this on the Savings & Investments board so I'll move your thread over there.

Pink

gozomark

by "American bank or a UK one" do you mean choosing $ or £ account (which is what whatatwit is presuming), or do you mean an account with either a US based bank or a UK based bank ?

Reaper

If the idea is to drip feed in contributions from multiple sources then I'd have thought it best to have it in the country/currency of the donors. That way you don't have to keep converting between currencies on small sums of money which is a hassle and expensive.

So that may mean saving in £ (if most contributions ar going to be from the UK) and then converting it at the final withdrawal.

There is, however, one big disadvantage doing that. If you know how much your target amount is to cover the fees currency fluctuations near the withdrawal date could mean you fall short or over-shoot. Saving in dollars would mean it would be easier to see how close to the target you are.

Cook_County

You could use a section 529 plan if you want it growing tax free. You should avoid PFICs (eg UK unit trusts).