UNest has made a name for itself by providing parents with a simple platform to save for their child’s future. But does it really live up to its reputation? We’re putting the service to the test in our UNest review to find out.
UNest Review: Overview
UNest is an app and investment account that allows families to fast-track college savings using automation. The investment platform was founded in March 2018 and is based in Los Angeles, California.
Russian entrepreneur and Chartered Financial Analyst (CFA), Ksenia Yudina, founded the company. As a parent herself, Yudina created UNest to reduce the burden of student debt and provide a tax-advantaged solution that makes it easier to pay college tuition.
The UNest app allows you to put money into a Uniform Transfers to Minors Act (UTMA) account for your child’s future. The secure investment app also provides tax benefits and potential cost savings by leveraging plans prioritizing the tech-savvy generation.
Previously, the platform provided investment opportunities in a 529 plan but discontinued this service in 2020. This isn’t too big of a drawback because a 529 plan comes with various financial advisor fees and can be complicated to manage compared to a UTMA account.
Additionally, custodial accounts are included, allowing you to monitor your child’s account as often as possible from any location.
UNest’s financial literacy tools and blog content provide education for parents, teaching them about investment, interest, money management, how to eradicate student loan debt, and more.
The entity acts as an investment advisor fully registered with the Securities and Exchanges Commission (SEC).
How Does UNest Work?
UNest features an easy-to-use app for managing your college savings that lets you invest in a UTMA account.
A UNest account doesn’t explicitly act as a personal savings account. However, considering the potential tax advantages and investment advantages, several parents use it similar to a personal savings account.
Each month, the platform picks various investments for the college savings plan based on the savings settings. After depositing a set amount into the UNest investment account every month, you can monitor your child’s portfolio through the app.
With UNest, portfolio plans consistently shift their asset combination as the beneficiaries get older. So as your child gets closer to adulthood, the portfolio becomes risk-averse.
The custodial account provides you with the advantage of controlling your child’s UNest account, so you can change fund allocation at any time. However, investments will need to be sold and subsequently reinvested somewhere else, potentially incurring taxes.
Friends and family members can send gifts to an account. Alternatively, you can make a minimum contribution each month in addition to the above-mentioned investment options.
Children gain access to the money in their accounts between the ages of 18 to 25. You’re advised to check the policies in your state of residence to determine which rules apply.
After reaching adulthood, the platform converts your child’s account from a UTMA into a brokerage account, letting them continue to save money or invest at their leisure.
You can also earn UNest rewards by purchasing services/products from its partners via the mobile app. Each time a purchase is made, UNest shares small bits of information with its partners to confirm eligibility. If you are eligible for the rewards, you will receive them within 7 to 10 business days.
Is UNest Free?
You can download UNest for free, and it does have some resources that cost nothing to use. However, you will need to pay to open an UNest account on the platform. We’re going to break down the fee structure a little later, but it is very affordably priced.
Does a UNest Account Gain Interest?
The UNest platform lets you generate compound interest and tax-free growth, so you can make as many contributions as you want each year, regardless of how much income you’re making.
With its age-based investment options, you can build up interest and principal, especially if you start your child’s account soon after they’re born.
Signing Up for UNest
Because UNest is a digital-only app, you can only sign up for its features via Google Play or the iOS App Store.
Signing up for an investment account involves a seamless four-step process.
First, you download the UNest app. To use the app, you need to provide some key details such as your:
- Date of birth
- Legal name
- Social security number
- Citizenship or permanent residency information for you and your child
Secondly, after filling out the above-mentioned details, you can start making unlimited monetary contributions, either putting money into the account monthly or bi-monthly. The minimum monthly contribution for UNest is $25. However, it should be noted that you cannot pause or stop your contributions as they are automated.
Thirdly, start receiving gifts from friends and family. This family investment app allows you to share a link where family members or friends can make donations to your child’s savings account.
Finally, you can watch your savings at any time through the app and monitor investment growth regularly.
What is a 529 Plan?
A 529 plan operates as a special investment account, designed specifically for future educational costs of a chosen beneficiary. The individual setting up the account selects this beneficiary.
While you contribute to a 529 plan with after-tax money, both its growth and distributions remain untaxed. However, if funds aren’t utilized for approved educational costs, the earnings could face a 10% penalty.
Custodial Account vs 529 Plan
Let’s look at both in a little detail:
Custodial Accounts (UGMA / UTMA):
- Purpose: Set up by adults for minors, these accounts are meant for the child’s financial future. When the minor reaches a certain age (18-25, depending on the state), they gain full access.
- Investment Options:
- UGMA: Primarily stocks, bonds, and ETFs.
- UTMA: All UGMA options plus tangible assets like real estate or cars.
- Taxation: Contributions up to $15,000 are free from gift tax. The account enjoys some tax advantages on its earnings, but higher earnings can be taxed at the parent’s rate.
- Flexibility: Once the child becomes an adult, they can use the funds for anything, from education to buying a home or even a wedding.
- Purpose: Specifically designed for future educational expenses. If used for other purposes, penalties apply.
- Investment Options: Limited to the plan’s offerings, primarily stocks and bonds.
- Taxation: Contributions are post-tax, but growth and withdrawals for education are tax-free. Non-educational withdrawals face penalties.
- Flexibility: Funds must be used for educational expenses to avoid penalties.
- Ownership: Unlike UGMA / UTMA, which becomes the child’s asset, a 529 plan remains under the parent’s or creator’s ownership, which can be beneficial for financial aid considerations.
In essence, the best choice boils down to flexibility versus purpose. If you want a dedicated education fund with tax benefits, a 529 plan is ideal.
However, if you want to give your child broader financial freedom in adulthood, a custodial plan might be more suitable.
Is UNest Safe?
UNest is an SEC-registered investment advisor that’s safe and easy to use.
Every UNest investment account is secured with the investment platform’s custodian, Apex Clearing Corporation — a registered third-party broker-dealer and certified FINRA partner.
Investments in your account are protected for up to $500,000. All gift funds that have been received but have not been invested yet are fully insured by the FDIC and protected by UNest’s bank partner, First Horizon Bank.
Every tax-advantaged investment account is also SIPC-insured for up to $500,000.
UNest Review: What’s Included?
- Tax Benefits
- Investment Options
In addition to the aforementioned minimum contribution of $25, the maximum contribution you can make to a UNest account is $15,000 individually or $30,000 with your partner. You can make those contributions free of gift taxes.
After setting up your monthly contribution, you can make one-time deposits at any time and go from there.
During the onboarding process, you will be asked to connect to a verified bank account. After connecting your account, you can choose your funding source, whether it’s your personal savings account or through a credit card from a valid credit card issuer.
You can then transfer the funds from your bank account through ACH for deposits or contributions. Bank accounts can be connected through account verification by Plaid.
Once you have received a UNest gift that’s shareable with family and friends, you can use it at any time to send gift money through your credit or debit card. All gifts are sent directly to your account on the platform.
If you’re an expecting parent, you can still receive gifts, with the gift funds held for the intent of investment after your child is born. Prior to investing savings, you must complete your account with the child’s social security number.
The minimum amount for gifts sent to your account is $5. No sign-ups are required for guests who are making one-time gift donations.
Another advantage of gifting with UNest is that children receive every bit of the gift funds sent.
UNest accounts allow you to earn up to $2,200 in yearly earnings that can grow tax-advantaged.
The first half of the $2,200 is tax-free, while the other half is taxed via the child’s tax rate. Any amount exceeding $2,200 will be taxed at your tax rate. The $2,200 threshold applies to gains in your account rather than the original contributions you made.
Note that all contributions to UTMA accounts are made with after-tax money, meaning that you, as the donor, do not get hit with income tax deductions for making them.
You can choose from five different investment accounts to suit your needs and pave a clear financial future for your child. The options range from the most conservative to very aggressive.
The most conservative UNest account allows for investing in bond exchange-traded funds (ETFs) and fixed income.
The most aggressive option lets you fully invest in equity through Vanguard. The other three options are age-based. Funds can even be invested in crypto.
Let’s look at these in a little more detail:
The Conservative portfolio is anchored in bond ETFs. These marketable securities track assets like indices or commodities, offering a predictable growth trajectory.
This option is designed with a focus on reducing potential losses, catering to those who prefer a cautious approach.
Age-based portfolios are structured to adapt over time. Their asset mix changes in alignment with the beneficiary’s age, striking a harmony between potential growth and stability.
Initially, they have a strong emphasis on equities, but as significant life events or milestones near, they shift towards bonds.
Investors are presented with three distinct options: conservative, moderate, and aggressive, each tailored to match varying levels of risk comfort
3. Socially responsible
ESG portfolios (Environmental, Social, and Governance) prioritize ethically-minded investments.
Beyond financial returns, they embody a dedication to broader positive impacts. They value environmental, social, and governance aspects, emphasizing responsible investing.
ESG portfolios not only consider a company’s eco-friendly actions and ethical workplace standards but also skillfully blend fixed income and equity strategies to achieve diverse investment goals
For those who embrace risk, the Aggressive portfolio is the go-to. Dominated by equities and backed by Vanguard equity index ETFs, it’s for those seeking high rewards.
While it promises potential returns, it also comes with its share of market volatility.
Is UNest Legit?
UNest is a legitimate and registered limited liability company (LLC).
Though UNest is not accredited by the Better Business Bureau, it has an A- rating on the BBB website.
Additionally, UNest employs bank-level encryption to keep all financial data secure. All data is protected using 256-bit SSL encryption.
The company’s compliance team routinely reviews all customer accounts to determine any suspicious activity or potential security breaches.
The platform has largely positive reviews from customers, crediting its ease of use, financial education, and transparency regarding its provision of services.
UNest Reviw: Pros and Cons
UNest is a fantastic option to help save for your children’s future, but there are a few drawbacks to the service.
Here are the pros and cons of UNest.
- Effortlessly save for a down payment or college tuition
- Offers extensive financial education
- Subscriptions start at $2.99
- Accounts scale risk level based on age
- Leverages bank-level security
- Can set up a family plan for multiple children
- Discontinued the 529 Plan
- Mutual funds have additional fees
UNest has garnered a strong reputation from users online. In fact, it has a 4.7 out of 5 rating on the Apple Store, with 3,400+ reviews.
These are just some of the glowing reviews that you’ll find online.
UNest has also earned a 4.3 out of 5 rating on the Google Play Store, with over 2,500 reviews.
Most of the testimonials provided are comfortably scoring the service with a 5 out of 5 rating.
Let’s take a look at what reported users have to say about UNest:
UNest Review: How Much Does It Cost?
UNest charges a flat subscription fee of $2.99 for its Regular plan and $5.98 for the Family plan. With the Family Plan, you can sign up a maximum of five children at the same time.
There is also a standard gifting convenience fee of 3.5% + 99 cents to cover all payment and process costs to provide services. However, if you’re using ACH, the gifting fee is 1% + 99 cents.
Additionally, once an account reaches $50,000, the fee structure moves to .25% of your account balance. Mutual fund investments have fees that range from .4% to .6%.
UNest Refund Policy
UNest allows customers to cancel either the Regular or Family plan at any time.
However, the platform stresses that any money you withdraw from them must go toward the child that was listed in your account.
When you cancel your UNest account, it takes up to five business days for the money to be transferred to your selected bank account. The platform reviews your file and ratifies the validity of your refund request before releasing the money back to you.
UNest has a solid customer support team that you can reach out to with any account concerns.
UNest Review: Is It Worth It?
UNest is an excellent service that is well worth the price. Your child can receive unlimited monetary contributions and earn tax-free growth on your investment to reach achievable college fund plans. There is even a free college savings calculator to ensure you’re on the right track.
UNest’s low minimum investment amounts, monthly fees, and diverse investment accounts make it a great option for investing in a college education.
If you’re looking to build a strong investment plan for your child’s future, you might want to put UNest on your shortlist.