Q. My oldest is a senior in high school and she wants a big graduation party. We don’t have much leftover money these days. Can we use funds in her UTMA for this?
— Mom

A. Yes, you can. But should you?

“Funds in an UTMA account can be used for anything that benefits the child that they are given to,” said Vicky Tomaro, an Investment Advisor Representative with Tomaro Financial Group in Wall. “There are no restrictions for education purposes like a 529 plan has.”

What might “benefit a child?” Could be a new car, a computer, and yes, even shoes.

Therefore, a party qualifies.

But this may not be the best — or most responsible — way to spend the money, especially because you said you’re not flush with cash.

Consider whether or not college bills will be covered from other sources, Tomaro said. Paying for education might be a be a smarter option unless you know, without a doubt, that all those costs will be covered.

Using the funds for education rather than taking student loans might also be a better move.

Take time to consider other needs the child will have in the future, Tomaro said, and think beyond tuition.

There will be a need to pay for books and supplies, transportation costs to and from school, spending money while at school and other expenses. Perhaps it could be saved for longer-term goals, such as a new car, a home down payment or to cover wedding costs.

In any case, when your child turns 18, the UTMA funds will belong to the child, and you’ll have little influence over where the money will be spent.

Email your questions to Ask@NJMoneyHelp


Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.