How I’m Setting My Kids Up For Financial Success - Finances Demystified

How I’m Setting My Kids Up For Financial Success

As a mother and financial planner, I’m hyper-focused on ensuring that financial limitations don’t hinder my kids from reaching for their dreams, whatever those may be. To make sure my kids are millionaires by the time they are ready to buy a car, go to college, start working, maybe start a business, travel – whatever – I’ve put several actions in motion which I’m now sharing here so you can do the same for your little ones – no matter how old they are. 

The Single, Absolute MOST Important Thing!

If you take nothing but one thing away from this article, I hope it’s this – the most important thing when investing for kids is simply starting. 

Whether it’s $5/week or however much you can afford – just start! Like, today. 

If you contributed $30/month from the day your baby comes into the world (that’s only $1 day!), they could have $13,169 by the day they turn 18th. Starting just five years after that reduces the overall amount to $7,740 (almost half!). 

That proves that the sooner you start, even a tiny amount has massive impacts. 

The amount you can accumulate for your kids is less critical than the financial knowledge, skills, and habits that you’ll be teaching them by starting – no matter where that starting line is. 

Developing kids into young adults who have the financial backing to kickstart their independence on a high note is seriously important. Don’t believe me? 

In 2021, only 38.1% of Americans under 35 owned their homes, and more than 50% of millennials aged 18-24 still live with their parents.

WHY?! 

Because young people cannot save enough for a down payment, whether that’s from crippling student loan debt, the rising cost of housing, or lack of financial literacy, the point is it’s seriously tough for young people to get ahead without a healthy nest egg and financial education. 

My Top Account Picks 

Specific saving and investment accounts are well-suited to benefit your kid’s long-term financial success. These accounts are better than simply opening a standard savings account (which offers such low returns they often don’t even keep up with inflation)!

Custodial Brokerage Account 

A custodial brokerage account is similar to a standard investment account that you may have for yourself. The most significant difference is that it is in your child’s name and, ultimately, their ownership. 

From parents to their family and friends, anyone can add money into a custodial brokerage account, up to $15,000 per year before a gift tax incurs. 

529 Plan

Investing in a 529 plan is all about education! 

When you invest money into a 529 plan, there are considerable tax savings when the money goes towards education – private school, college, trade school – for tuition, housing, and supplies. The tax benefits can equate to thousands of extra dollars that go to your child’s future. 

Roth Individual Retirement Account (IRA) 

A Roth IRA is an account that parents or guardians can open on behalf of a minor earning money. My daughter, Dawsyn, has already started earning a little money through an Instagram account we set up for her, so anything she makes from that goes straight into her Roth IRA. 

These accounts allow a minor’s earnings (plus you can contribute up to a matching amount) to grow tax-free! 

It’s a great way to teach kids the importance and benefits of investing income vs. spending it. 

Education, Pass It Along! 

The cornerstone of setting your kids up for financial success is education, education, education! I’m a huge proponent of financial literacy – armed with proper knowledge and know-how, anyone can transform their financial situation. 

According to the National Center for Education Statistics report, you can’t depend on the school system to teach your kids financial literacy, with one in five American 15-year-olds not understanding basic economic concepts. 

Make sure you are educating yourself, investing for yourself, and striving to meet your financial goals so you can reap the same rewards you want your kids to experience in their lifetime. 

Want to advance your financial education? Check out my free masterclass on how to start investing without having a fortune already saved. 

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