Quit going broke for your kids and start building wealth for them.
I’m so grateful for all the things my parents did for me with the money they had but I would have rather had some of my college tuition paid for over all the material stuff I got that I can’t even remember now.
At some point, somebody has to step up and break the cycle of looking rich and being broke in your family. Why not you? Here are the 4 main ways we can continue to invest in our future generations:
1. College Savings: To provide a example, for our middle son who’s four years old he has a 529 college savings plan. As of today (September 2019) his account balance stands a little over $16,000. His return on investment is $4,905.55. I use this example because I’m not sure why investing scares people. I’ve heard people say it’s risky but it’s even more riskier to put your more in a savings account that draws .0002 interest and inflation out grows your savings and you wound up losing money.
You can use a 529 college savings account. This is one of the most popular ways to invest in your child, grandchild or relative. A 529 college savings plan is a savings account on steroids that is used to save money for college. The money can be used to pay for college expenses and recently the law was changed where the money can be used for expenses K-12 tuition as well. You invest your contributions into normally an age based investment fund you can can select to be conservative, moderate or aggressive. Monies in a 5209 college savings plan grows tax free and will not be taxed when the money is taken out of pay for college.
With a 529 college savings you can use at any higher learning institution whether it’s community college, technical school, or a university.
What if you save and your child gets a scholarship? You would be able to take a penalty free withdrawal from the 529 account up to the amount of the scholarship award.
What if my child decides to not go to college? You can transfer the funds to another child in the family or a relative or even to yourself if you wanted. The longer the money sits in the account the longer time and compound interest does what it do best = grow!
The 529 covers tuition, books, enrollment cost, expenses for computers and the cost of the internet used by child, room and board (would have to check with the school financial aid office for limit you can withdraw for qualification on withdrawing amount).
For more information on 529 savings plans check out the website, savingforcollege.com as it a wealth of information on college savings and 529 information.
Another way to pay for college is through pre-paid programs where you pay for tomorrow college cost with today’s dollar. As a Florida resident, we use the Florida Pre-Paid program for our youngest son. It cost $191 a month and will pay for 120 hours of his college education. If he gets a scholarship, we can withdraw this money (41k) and either gift it to him or do whatever we want with it.
2. Savings Accounts: Okay back to savings account. Pick an account that earns a good APY that can beat inflation. Ally Online bank is my go to bank for savings as the APY was 2.2% – currently is 1.9% which still beats regular savings accounts. It’s amazing if you just start and automate every pay period a set amount of savings what it will grow into. I started doing this for my boys with starting with $25 each pay period and they each have 4 figure savings accounts and growing.
3. Brokerage Accounts: Financial literacy is key at such a young age because if you can teach your child early the principles foundation of financial literacy it can carry them a lifetime. You can use Stash or Stockpile brokerage accounts and buy fractional shares of different companies. You can start out with $5 or higher and invest into various companies. I like the own what you consume. If your child has an Apple iphone – buy some shares in Apple stock with $5 so they can start learning how investing works. The earlier you start the more time compound interest grows. Once the child reaches the age of 18 this becomes their money officially however until then you can open a custodial account while they’re 18. This money could be used putting a down payment on a home or wedding or allowing the money to grow and stay invested.
4. Retirement Accounts – believe it or not kids can start a retirement account. One caveat, it has to be through “Earned Income.” So essentially your child will have to have some type of legit income to open a Individual Retirement Account. This could be through modeling, working summer jobs that pays a W2 etc. I’ve seen it where people who own their own business employ their children as models on their websites and the child gets compensated in this way. Imagine setting up a IRA account for your child and saving $365 a year (a dollar a day) and investing in a broad mutual fund such as S&P 500 over 65 years. The account would grow into $2 million dollars.
Let’s break the financial curse and build general wealth for our kids. They are the future, it is our responsibility to teach them well.
.
.
