529 Plans Can Work, But...
Ksenia started UNest to help parents save money for their kids’ future needs, whether education expenses or something else. Although many parents turn to 529 plans for college savings, these plans have major downsides. They’re complicated and time-consuming, and there’s a 10 percent tax penalty if you use the money for anything other than higher education expenses. “That's a big limitation for a lot of people because they feel like it's too restrictive,” Ksenia says.
Before founding UNest, Ksenia learned all about the benefits and drawbacks of 529 plans while working at Capital Group, the No. 1 provider of 529s and other custodial accounts. “I was helping a lot of clients … start saving and investing for their children, but the process was super complex and painful for us as financial advisors and for the clients,” she says.
Ksenia thought there had to be a better way, and that sparked the idea for UNest and its financial planning app. At the time, there were plenty of financial planning apps on the market, but none of them specifically focused on helping parents save money for their kids’ future. His friends and clients began “asking for a simple solution to start saving for their kids because they were trying to make a difference and … avoid the student debt that they were exposed to,” she says.
UTMA Plans to the Rescue
The UNest app avoids 529 plans entirely, turning instead to another type of custodial account called a UTMA. This type of account is similar to a 529 in some ways; in particular, there are tax benefits to using it, and it’s federally sponsored.
However, a UTMA account has a few significant advantages over a 529: Parents don’t have to spend the money on higher education. Instead, if their child doesn’t plan to go to college, they can spend it on something else that benefits him or her. Another advantage is that it’s simply easier to apply for a UTMA because there’s less paperwork. “We have a great partner on the back end who's helping us with all taxes, communication, all of that stuff, but it’s a much, much easier platform to manage,” she says.
The UNest app doesn’t just help parents manage the funds in their UTMA accounts. It also provides investment tips and a platform for other people, like a grandparent or friend, to make donations. Parents can even earn rewards from major retailers like Doordash and Disney+. Like any good financial planning app, the UNest app security encrypts all financial information.
Crypto Solution, Advice for Early-Stage Entrepreneurs
Ksenia says UNest has just launched what it’s calling the first crypto solution for families. She says many people perceive the current economic climate to be a good time to buy cryptocurrencies, and UNest wants to take advantage of that. Plus, many UNest customers have been asking for a crypto feature.
“The beauty of UNest platform is that we encourage long-term investing and long-term thinking. We are not here for day trading,” she says. “We're trying to stay away from the short-term noise. And people that generally join the platform, they're here for the next 10, 15 years.”
One of the most important lessons Ksenia has learned in starting UNest is to surround yourself with the right people as a founder and incentivize them properly. This is particularly true at the beginning.
“If you launch the company, get the right advisors on board, especially if it's your first company,” she says. “Don't be greedy about your equity … In the early days, I didn't have much cash to motivate people and incentivize them to help the company, so I used equity. And then people really buy in, and they want you to succeed, and they believe in the potential.”