If you’re fortunate enough to have money left over from your child(ren)’s Survivor benefits every month, you must save those funds following the Social Security Administration (SSA) guidelines on saving funds for a beneficiary. The guidelines are pretty dry and verbose so I’ve tried to put them in layman’s terms:

How should I handle funds not required for current needs?

Per my blog post on FAQs on Social Security Survivor benefits for children, current needs include items like housing, food, clothing, utilities, medical care and insurance, dental care, personal hygiene, and education. Any funds leftover after covering current needs must be saved for your child and can be set aside for “definite foreseeable needs” such as their education or rehabilitation (if disabled). For example, I’ve invested my daughter’s Survivor benefits in a 529 account to pay for her college education.

Where should I place the funds?

Funds over $500 should be placed in an interest-paying account or investment for the benefit of your child, where the interest and dividends are the property of your child. Examples of such accounts include a custodial account, a youth account, a 529 account (for education), the new Trump account (also known as the 530A IRA), the custodial Roth IRA, or a TreasuryDirect minor account (specifically for U.S. Savings Bonds). I’ll write a future blog post comparing these accounts.

What investments does the SSA prefer?

The SSA prefers very low risk investments, specifically recommending U.S. Savings Bonds or interest- or dividend-paying accounts in a bank, trust company, savings and loan association, or credit union that is insured under either Federal or State law. Also ok is investing the money “according to State laws governing the investment of trust estates by trustees.” What that means is that the investments must be diversified and low-cost and follow a logical investment strategy.

I interpret this to mean that a high yield savings account and low-cost stock market index funds are fine (the latter specifically for longer-term investments like 5+ years). But high-risk investments like cryptocurrency or putting all the money in one stock would not be allowed.

Does the SSA have restrictions on investing funds?

The SSA has a few clear rules for managing your child’s money:

• You may not invest funds in any company, corporation, or association where you have a conflict of interest;
• You should not keep money at home or mingle it with your own money or with other funds;
• You must keep accurate records in order to account for the use of funds.

How must I title an investment?

You must title the funds for your child in a way that shows you hold the investment for the benefit of your child. Titling examples include the following, where you are the payee and your child is the beneficiary:

• For U.S. Savings Bonds: (Name of Beneficiary), (Social Security Number), a minor for whom (Name of Payee) is representative payee for Social Security funds
• For a savings or checking account: (Name of Payee), representative payee for (Name of Beneficiary)

Note: The examples listed above are not all-inclusive. You should always ask the bank to verify that, under State law, the titling of an account:

• Shows you only have a fiduciary interest;
• Permits you access to the funds for your child’s current needs; and
• Does not permit the beneficiary to have direct access to the funds.

Disclaimer: I am not an expert in Social Security Survivor benefits and am merely passing along information based on my understanding of them. My source of information is the SSA website.