How Do You Invest for Your Children?

[NickT41]

I'm still en route to the fast lane, but I'm in the middle lane with my blinker on quitting the 9-5 in a year or two. I'm currently reading Unscripted and loving it. While my mindset has certainly changed over the last ~5 years, it's still tough for me to ignore the scripted advice on investing. I'm not talking investing to get rich, but investing to keep the money that you have and grow it.

I've got twin boys who are less than a year old. I want to do everything I can to lead them on the right foot as they get older - not give them too much, but enough to chase their dreams, whatever they may be.

I'm a college grad myself (engineer) and that served me fine until diving into entrepreneurship and starting my side hustles. Now, I'm not so sure it's worth it. If my children want to go to college, I'll send them to college. Who knows what the landscape will be like in 18 years. We're heading towards a more entrepreneurial economy.

So, I'll cut to the question. How do you invest for your children? They have received money from their grandparents and others sitting in a savings account. I've also been saving a bit for them month-to-month. Do you put it in a 529 and possibly take a hit if they don't pursue college? Do you put it in brokerage and invest in stocks/index funds? Under a mattress? Just curious what like-minded thinkers do.

 

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[Sean Kaye]

We buy precious metals for our son.

Gold and Silver predominantly.

He's 14 and he finds it interesting, but he prefers Xbox Live Gold at the moment.

 

[AgainstAllOdds]

I don't have kids, but have a little brother who I've been mentoring since he was born (he's 13 now).

The biggest thing I invest in him is time.

That includes making sure he's a good person, smart, hardworking, etc.

We also run a little business where he and I split the capital investment 50/50, but he gets 100% of the returns. I strongly believe that teaching him how to make money will pay off 1,000,000 fold vs investing in stocks or similar investments on his behalf.

When I was eight years old, my parents invested all of "my" money into stocks (in quotes because it was money I received and never earned). The crash came in the early 2000's and I was left with nothing. No cash. No learning experience. Nothing.

If I have kids of my own, I'll be putting their money into a trust which will include the family home (paid off), and enough money to pay for family expenses and their college (I'm not sold on college in the future, but they can use those funds to start a business, etc). There will be no risk or investment with that money. That money is just a safety net to guarantee them financial stability while they grow up from age 0 to 22.

The trust system is how a lot of my mentors have done it.

With the money in there, I can then take on risk by investing in my business or wherever I see fit. The money I earn will eventually be theirs, so there's no reason to separate that income into something other than where it'll receive maximum returns.

Other point to note: Investing in things like "college funds" makes no sense since universities will use that information to provide your children with no financial aid. You have to classify that amount of money differently so that you don't get taken for a sucker. There's nothing worse than saving for 18 years and then being punished for it.

 

[CareCPA]

Our first it on its way. Here's our plan:

Invest in ourselves and our business. By becoming financially sound, we can pick and choose how to help them financially in the future. The 529 is a little too restrictive for me, and the UTMA/UGMA accounts don't let me have enough control if my kids aren't mature enough when they turn the age of majority.

We will have term life insurance that will be directed to a trust (until our assets are large enough that we don't need it anymore). That way, if something happens to us when our kids are little, they are not a financial burden on their guardian. This would give them enough starting out to go to college or invest in themselves.

 

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[jlwilliams]

Indexed universal life insurance. It gains like any other indexed fund but it's life insurance so it grows tax free and is guaranteed to not lose value. Gains in a rising market, holds in a falling market. When they are old enough to use their grown money (maybe as down payment on first income property) they can borrow from themselves. Again, no tax. Kids can use compounding interest because they have time. They also have no experience or income, so shocking their gifts into a fund that builds a foundation makes sense for a kid. "Slow lane" for an adult, best game in town for a toddler.

Look at UHL's "million dollar baby"

 

[MiguelHammond10]

I'm still en route to the fast lane, but I'm in the middle lane with my blinker on quitting the 9-5 in a year or two. I'm currently reading Unscripted and loving it. While my mindset has certainly changed over the last ~5 years, it's still tough for me to ignore the scripted advice on investing. I'm not talking investing to get rich, but investing to keep the money that you have and grow it.

I've got twin boys who are less than a year old. I want to do everything I can to lead them on the right foot as they get older - not give them too much, but enough to chase their dreams, whatever they may be.

I'm a college grad myself (engineer) and that served me fine until diving into entrepreneurship and starting my side hustles. Now, I'm not so sure it's worth it. If my children want to go to college, I'll send them to college. Who knows what the landscape will be like in 18 years. We're heading towards a more entrepreneurial economy.

So, I'll cut to the question. How do you invest for your children? They have received money from their grandparents and others sitting in a savings account. I've also been saving a bit for them month-to-month. Do you put it in a 529 and possibly take a hit if they don't pursue college? Do you put it in brokerage and invest in stocks/index funds? Under a mattress? Just curious what like-minded thinkers do.

 

[MiguelHammond10]

I have a long term investment for my kid and same time savings accounts for him so by the time he will grow up the savings and the investment he can survive with it.

 

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[daru]

In Sweden you actually get money for having kids (paid by high taxes in the other end I guess). Anyway, I put part of that monthly "free" income into typical slowlane investing by a free index fund. I also bought one share of Tesla for my daughter. I figured it's free money AND she actually has time (3 years old) to let it grow by compounding(?). Of course her basic needs and quite a few "extras" is taken care of already.
I keep about half of her money in cash though in case of market melt down. May or may not try timing the next crash for her.

By the way, education is free in Sweden (again paid by higher taxes) so there is not necessary to save for collage. But sure, that can change. If she for some reason wants to go to collage.

 

[andyhaus44]

I love it, Sean!

My boy jab 16 months old and ever since he was born, instead of buying him toys, clothes or something like that, I’ve bought him silver (coins).

My wife understands that precious metals go up in value so she’s on board with me

Thank you for sharing, Sean

We buy precious metals for our son.

Gold and Silver predominantly.

He's 14 and he finds it interesting, but he prefers Xbox Live Gold at the moment.

I

 

[SummerGladness]

The biggest thing I invest in him is time.

Yeah this. It's your most precious resource for a reason and kids soak up everything from you, they can't do that if you're not there. That said we need to work on ourselves in order to provide some value but start with love and go from there.

instead of buying him toys, clothes or something like that, I’ve bought him silver (coins).

haha wtf? Pretty sure toys and clothes are right behind food and shelter in the hierarchy of needs for kids dude!

For me I would also add keeping yourself fit and healthy as an investment for your own children. Too many parents are in bad shape (esp in the US/UK) which sets a bad example and deprives the children of an active participating parent. Huge value in this for both you and your kids.

That might sound cliche but if you're some fat a$$ sat on the bench with a walking stick or mobility scooter then you're not going to be much use.

 

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[andyhaus44]

Yeah this. It's your most precious resource for a reason and kids soak up everything from you, they can't do that if you're not there. That said we need to work on ourselves in order to provide some value but start with love and go from there.

Yeah I know, he has a lot of toys and clothes already.. haha. Yeah I'm fit and pride myself on that so he will make good health choices


haha wtf? Pretty sure toys and clothes are right behind food and shelter in the hierarchy of needs for kids dude!

For me I would also add keeping yourself fit and healthy as an investment for your own children. Too many parents are in bad shape (esp in the US/UK) which sets a bad example and deprives the children of an active participating parent. Huge value in this for both you and your kids.

That might sound cliche but if you're some fat a$$ sat on the bench with a walking stick or mobility scooter then you're not going to be much use.

 

[Bryan James]

I have no kids but I think if I did I would be sure to teach them all things economics, business, finance and entrepreneurship and encourage them that failure is better than not even trying.

 

[Areding]

I opened a bank account in the name of my son but set a condition that he could not manage it until he was 25 years old. Fortunately, he treated such limitation with understanding.

 

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[The Abundant Man]

I opened a bank account in the name of my son but set a condition that he could not manage it until he was 25 years old. Fortunately, he treated such limitation with understanding.

Why 25 and not 18?

 

[garyfritz]

Why 25 and not 18?

The prefrontal cortex (responsible for planning, thinking ahead, understanding consequences) doesn't fully form until about 25. The typical 18-yr-old is still an irresponsible kid. Waiting until 25 makes sense to me.

 

[The Abundant Man]

The prefrontal cortex (responsible for planning, thinking ahead, understanding consequences) doesn't fully form until about 25. The typical 18-yr-old is still an irresponsible kid. Waiting until 25 makes sense to me.

I get your point but to me it's just delaying adulthood.

I think of it as this-What's the best time to learn a language? The earliest age possible. From birth through the infant years, the brain is still forming and developing. At this point, it's like a sponge. It absorbs any and all information through it's surrounding environment. If you don't start teaching early, it get's harder for the brain to learn as it gets older.

Which, you're correct in that the brain fully develops by the age of 25. But once it hits that age, it's stuck in it's ways. So if you don't teach it to be responsible during the adolesent years. It's still going to think "YOLO!" for most of it's life.

It's kind of like helicopter parenting where the parent still does everything for their child all the way throughout college.

"Mom! My teacher gave me an F on an assignment."
Parent comes in to class and starts yelling at the teacher.

The kid doesn't learn any personal responsibility.

Alexander the Great conquered the known world by the age of 20.

But then again...you're the parent. It's your kid. Do whatever you want.

 

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[Kak]

The best thing to do for your kids is to give stock and assets to trust funds in their names before it appreciates.

If it is a living trust, as in you haven’t died yet and your kids are going to be getting some big chunk of change... I’d argue making the dispursements later in life. Like 45 years old. Until then let them use the money for school and other select things you deem prudent. Ex: buying first home gets a little disbursement. Graduating college. Getting married. Little tokens of help from the trust before the big load comes.

 

[garyfritz]

I get your point but to me it's just delaying adulthood.
I think of it as this-What's the best time to learn a language? The earliest age possible.

It's not the same. The early years are the optimal time to learn language because the kid's brain is so plastic.

Different kids mature at different times obviously, but until the PFC matures (usually around 25), they are basically NOT ABLE to make fully mature and logical decisions like an adult. They don't have the hardware for it yet. Expecting an 18-yr-old to make adult decisions is a bit like expecting a 5-yr-old to play basketball. The 5-yr-old doesn't have the height, coordination, etc, and nothing you do will give that kid the height &etc. You have to wait until his body matures. Same with the PFC.

 

[Vanesco]

I think the best gift for children will be real estate. It is necessary for them on their full age when they want to live separately to have a roof over their heads.

 

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[ZCP]

Buy them a small business. Help them run it from age 11 to 16. Let them run it after that.

Take a portion of their money and put it income tax free income funds. Passive money every month. Show them how to get that to paying their expenses and making them free!

Cashflow for Kids is a great game. With that, invest your time in them. Show them how to provide value and change the world.