If you have kids in your life, do your part to set them up for a bright financial future and help them get ahead. In this video, I’m going to cover the 4 types of accounts you can open for your kids, and the pros and cons of each. I’ll also touch on tax considerations, plus how these accounts effect eligibility for financial aid to pay for college. Lastly, I’ll share some tips on how to start educating and encouraging kids to invest in their future
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That’s my official account, and I will NEVER message you about investment schemes, so please be careful and block & report any scammers posing as me.
TIMESTAMPS
0:01:24 – Terminology: Owner vs. Beneficiary vs. Custodian
0:03:28 – Roth IRAs for kids (aka custodial Roth IRA)
0:06:15 – 529 accounts
0:07:25 – Coverdell ESAs
0:09:45 – UGMA/UTMA brokerage accounts
0:11:40 – Pros & cons of each account
0:15:25 – Tips to encourage kids to save/invest
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***BOOKS I RECOMMEND 📚***
I Will Teach You to Be Rich (hilarious how-to book on personal finance for millennials)
The Little Book of Common Sense Investing (Jack Bogle’s classic advice on index funds)
InvestED (step-by-step, millennial-friendly advice on how to pick stocks like Warren Buffett)
Unshakeable (this book = courage. blast ALL the fears & misconceptions you have about investing)
Rich Dad Poor Dad (#1 selling personal finance book of all time… need I say more?)
Think and Grow Rich (the ultimate book on money mindset and wealth consciousness)
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***MY FAVORITE MONEY TOOLS 🖤***
YNAB (I literally can’t live without this budgeting app, so obsessed)
Wise (like Venmo but for international currencies – I use this app a LOT for my life in Mexico)
High-Yield Savings Accounts (don’t settle for 0% when you can get 3%+ on your savings)
Ledger Nano S (crypto storage hardware wallet, because “Not Your Keys, Not Your Crypto”!):
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DISCLAIMERS & DISCLOSURES ❤
This content is for education and entertainment purposes only. Rose does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
This description contains affiliate links that allow you to find the items mentioned in this video and support the channel at no cost to you. Investing With Rose is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Thank you for your support!
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LEARN MORE ABOUT: IRA Accounts
INVESTING IN A GOLD IRA: Gold IRA Account
INVESTING IN A SILVER IRA: Silver IRA Account
REVEALED: Best Gold Backed IRA
Investing For Kids: How to Give Them a Head Start
Investing is an essential aspect of financial literacy that everyone should learn at an early age. Teaching kids about investing not only cultivates responsible financial habits but also helps to set them on a path to financial success in the future. By starting early, children have the advantage of time, which can significantly benefit their investments through compound interest and long-term growth. Here are some tips on how to give your kids a head start in investing.
1. Teach the basics: Begin by explaining the basic concepts of money, saving, and investing to your kids. Help them understand the difference between spending and saving money, and introduce them to the idea of making their money work for them through investments.
2. Set financial goals: Encourage your children to set financial goals they want to achieve. Whether it’s saving for a new toy or a long-term goal like college tuition, teaching the importance of setting goals will instill a sense of purpose and direction in their financial decisions.
3. Start with a savings account: A simple way to introduce kids to investing is by opening a savings account in their name. This will teach them about earning interest and the idea of saving for the future while also cultivating good saving habits.
4. Show them real-life examples: Engage your children in discussions about investments by sharing real-life examples. Explain how stocks, bonds, or real estate work, and show them how investments can generate income over time.
5. Use technology and investment apps: In this digital age, there are various online platforms and mobile apps specifically designed to introduce children to investing. These platforms offer simulated investment experiences and teach kids about the stock market and financial decision-making in an interactive and engaging manner.
6. Involve them in family investments: If you have investments, involve your kids in discussions about them. Explain why you made certain investment decisions and how those investments are performing. This will help them understand the ups and downs of the financial markets and develop a practical understanding of investing.
7. Encourage savings and investment habits: Teach your kids the importance of saving and investing a portion of their income or allowance regularly. By developing a habit of saving and investing at an early age, they will be more likely to continue these habits into adulthood and benefit from the compounding effect of long-term investments.
8. Teach risk and reward: Explain to your children that investing comes with risks and that they need to be prepared for potential losses. Help them understand that smart investing involves diversification and being cautious with their money, while also highlighting the potential rewards when investments perform well.
9. Foster a growth mindset: Encourage your kids to adopt a growth mindset when it comes to money and investing. Teach them that learning and making mistakes are part of the process and that setbacks can be valuable learning experiences. This mindset will help them to persist and adapt in the face of challenges and ultimately become successful investors.
10. Be a role model: Perhaps the most important aspect of teaching kids about investing is being a good financial role model yourself. Practice what you preach by demonstrating responsible financial habits, saving and investing regularly, and showing discipline with your own spending.
In conclusion, investing is a valuable skill that children can learn at an early age. By introducing them to the world of investing and providing them with the necessary knowledge and tools, we can give our kids a head start towards financial success in their adult lives. With time, patience, and the right guidance, they can develop a strong foundation for building wealth and making smart financial decisions.
Can I get my child a roth ira and pay her for chores?
I have opened 529 long time back .. but planning to open UTMA /UGMA .. since that would a great option just for not only for school fees but also personal expenses .
Thank you so much for this! I’ve been wanting to set up accounts for my children but had no idea how. I just recently found your channel and it’s been amazing. Thank you!
What’s the tax percentage taken of UGMA/UTMA?
ln the netherlands the parents get 270 euro per 3 months and 100 euros each month from taxes this is around the age of 0 to 12 13 to 17 years the parents get around 400 euros each 3 months and 250 each month from taxes. The money we get from the taxes and goverment goes to education from the age 13 years to 17. The problem is we need to pay for those books when they go to middle and high school and also in college. They start there study around 16 years. And they are done around 19 years. The money we get i devided in 3 accounts. one for us for swimming lessons and other things like a sinking fund for whatever reason she needs it my dad in germany has one for her car and with my mom i have that for college. I also know that money will be gone after she is done with school. My husband says when she is 16 and she has free time she can work with me for extra cash in his company. They dont have those accounts here in the netherlands. The only thing we can do put in an old sock or put in a savings account.
What if your baby walks the dog with you?
Incomplete but good info. WARNING – Unless the rules have changed, 529s are often limited to the state they are purchased in – the one defining the investment accounts used. If NOT used for college the money is hard to get out – with large tax penalties if you can even get it out. So if you buy one in AZ or TX and the child wants to got to MIT or Stanford – you get screwed. An UGMA gives control to the child at 18 & most/all banks will insist on notifying them. Instead, you can open a separate brokerage account – or your OWN Roth IRA – and list the child as your designated beneficiary. When they go to college, you can then draw out the funds as they are needed – paying taxes & maintaining control. If they decide to drop out/party – you then get to use the funds yourself, shift them to other kids, or set up a Trust for that grandchild/child for later in life. If you have already maxed out your 401K/IRA, the money is already taxed – stick it in a brokerage account that the state has no control over – and you can decide when to tell the child/grandchild about it. Further, you can use it to teach them the power of savings, matched funds, and hard work. From 1st Grade on, I put in $100 for every A my kids earned – $50 to them & $50 to their accounts – but paid nothing for Bs/less; they almost always got straight As. I also set up a Roth IRA for their accounts & matched every dollar they earned & put into their Roth for college – up to $2K/year – telling them that is similar to what most companies would do for their 401Ks in the future if they choose. I continued doing the matches through college for the excess money they earned after hours/over summer. From an early age, my kids got excited to see how fast the values grew over the months/years, and saw the compounding value of reinvesting the dividends. They ALL have graduated without loans, work good jobs, and have 401Ks from day one – with a remaining chunk from their original college funds running in Roth IRAs. Now I joke that "I'm spending their inheritance" – to which they say "So what; I'll be set; have fun!"
Rose: love your show. Question does it make sense instead for a grandparent to open up a brokerage account with a transfer on death beneficiary as the child to limit taxes for the account? Drawbacks to that option?
Holly shit . This lady is fucking hot and smart.
College
Great video Rose! What is your opinion on the 529 portfolios with Vanguard Target Enrollment funds? The expense ratios are quite low . I want to start investing for my 2 year old.
OK so what if we do not want our children to have access to this money regardless of their age what is The next best investment option. Because you could teach a Child to be financially responsible but they could literally just blow all this money you have saved for them over all these years.
Very good video. Thank you.
I really enjoyed this video! Thank you so much
Really appreciated this video. Put a lot of my questions in perspective.
College
529 details please
College
So the roth ira for kids is until she 59 years old to take the money out?? That doesn't make any sense for me
College
I has 4 kids, but seems like only one kid really listening and interested to learn what I'd teach them from what I've learned from all the financial channels on YouTube. FRUSTRATING!
I don't see the point for UGMA/UTMA, mind as well just keep the cash or open a saving account so you don't have to pay tax later when you need to withdrawal.
This is so informative! I am looking to open my kids accounts. Didn’t know where to start until now 🙂
So do the children have to put earned income each year on taxes?
Great video as always Rose! Thank you 🙂