I have been trading Stocks for fun on my spare time with virtual training applications. (Last year, I made over $150,000)
I’m going to a private college ($46,000/year), and I have received alot of scholarships, grants, etc… My family EFC is $0, and I have been saving money for college. The way I am set through various external scholarships, I will come out of college debt-free with no loans.
Of course, this is great, but I would also like to begin investing in the stock market. Although, I’m very confused and wary of doing so in case it hurts my financial aid… I have saved up nearly $13,000 (in cash) and would really like to begin investing. I can’t just leave $13,000 in cash at home or in my dorm room at college, and I can’t necessarily put it in the bank (in fear of FAFSA seeing it). I don’t have anywhere to put the money. Is there a way I can begin investing without alerting FAFSA and losing Financial aid because I ‘have money’? Perhaps I can open some kind of custodial account under a grandparent? (If that is a possible thing?)
I also plan on obtaining a doctorate, so I can’t just wait until I’m all done with college.
Thank you for helping me navigate through this questionable problem!
The kid said that he was having luck/fun with a VIRTUAL training applications…I don’t think the $150K s/he’s referring to is REAL. If you read his other thread, s/he’s talking about having $13K in income from working during the summer.
To answer the question - the only way one can shield - not HIDE - assets is to put them into an retirement account (a traditional or Roth IRA, SEP (Self Employed IRA), 401K, etc. You probably need to declare the income, though, and it’s not clear how that may or may not affect your EFC. Assets not in retirement accounts need to be reported, although there is a exclusion (i.e., a portion not considered for the purposed of calculating your EFC). Not sure how much. You probably should talk to a financial planner or tax person that knows about college funding.
Thank you LoveTheBard for pointing that out - the 150k is not real money (I wish it was though!)
The 13k I have saved is from mowing lawns, babysitting, etc… Just cash that I have saved instead of using it for eating out or buying the latest clothes.
It’s a retirement account. You put money into the account and can then invest it however you’d like.
Your problem will be, as @lovethebird was saying, that you need to report earned income if you’re going to be eligible contribute to an IRA. I have no idea if/how you can somehow report your cash as earned income. Something like $6,000 of student income is sheltered from FAFSA, so in an ideal world, you could “earn” $5,500 each year and put it all into an IRA.
As mentioned on your other thread, there is a chance that your EFC will be zero regardless of whether you have $13,000 or not.
My school never taught me about these types of things -
What exactly is an IRA? <<
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An IRA (Individual Retirement Account) is a tax sheltered account to save for retirement. There are a couple of different versions - a Traditional IRA and a Roth IRA. The latter is better since the distributions at retirement are not taxed, and your income is low enough that you can open one.
As mentioned above, the money going into an IRA must be earned income from that tax year- so it must have somehow been reported to the IRS. If you babysat and mowed lawns, most likely you would have gotten all cash transactions. If you plan to file taxes for 2015, thus declaring income from these endeavors, then you are eligible to put some of that money in an IRA (up to the max annual limit ). The IRA can be opened as a brokerage account and you can buy and sell stocks without incurring any taxes of the gains.
Back to your $13000 - since your EFC is $0, it’s probably your best bet to keep it as liquid cash, because college comes with all sorts of additional expenses. A portion of student assets is not counted in FAFSA, but like Post #3, I do not know how much. Since you plan to be a doctorate student some day, perhaps you can research this in fafsa.gov’s website as your first research project .
No, you cannot trade with money that’s in your IRA. It just sits in an account, accruing interest. If you touch it before retirement you pay a hefty penalty.
On the FAFSA you will be asked about any money that you have to your name: bank accounts, trust funds, etc. Cash is included. If you do not disclose the amount you are committing fraud, and like someone else pointed out, potentially hurting someone else that NEEDS financial aid.
@NHuffer - as mentioned in the other thread, I found out from my parents after my original post that I am auto EFC, and parents parents didn’t have to inform FAFSA about my assests. No fraud was committed, everything was done legally.
@NHuffer you can trade stocks, or mutual funds, in a Roth Ira , or any type of Ira if it’s opened with a brokerage account like Fidelity. All gains are tax deferred until you can withdraw at minimum age 59.5.
@CollegePianist : you cannot withdraw from any Ira until you are 59.5 years old,without incurring a hefty penalty…
But I am confused, if you didn’t have to inform Fafsa (not sure why) about your assets, why can’t you open a bank account and just put the money in? Something just isn’t adding up with your queries.
When certain criteria are met, FAFSA skips over certain questions resulting in a low or auto zero EFC. In these cases, student assets are not included. I agree that ‘something just isn’t adding up’ on this thread, however.
@mathprof63 - I didn’t know that I could prior to speaking with my parents about being auto EFC. I discovered that I CAN put it into a bank account, and that IS what I am going to do. I was curious about IRA’s and their connection to the stock market (a.k.a. Fidelity) - I’ve never heard of such a thing. I don’t know why alot of schools push things harder, like the Pythagorean Theorem but never talk about real-life financial options. After this whole thread, I’ve learned a lot more about finances.
I suppose now would be a good time to thank everyone for the valuable info throughout this thread. Thanks!