The rich use many tricks to make their children millionaires (and reduce taxes).
And you can use them to make your child a trust fund baby too.
Here are 10 strategies and accounts to make your child rich:
And you can use them to make your child a trust fund baby too.
Here are 10 strategies and accounts to make your child rich:
1. Set Up a Trust
Trusts offer many benefits like asset protection, tax advantages, and the ability to control how assets are distributed.
With a trust, you can transfer assets to your child and ensure that your child's money is managed responsibly.
Trusts can be set up to distribute assets at specific times or under certain conditions.
As the trustee, you'll have control over the trust and can make decisions.
A trust is protected from creditors and lawsuits, protecting your child's assets.
Trusts offer many benefits like asset protection, tax advantages, and the ability to control how assets are distributed.
With a trust, you can transfer assets to your child and ensure that your child's money is managed responsibly.
Trusts can be set up to distribute assets at specific times or under certain conditions.
As the trustee, you'll have control over the trust and can make decisions.
A trust is protected from creditors and lawsuits, protecting your child's assets.
2. Custodial Roth IRA
A Roth IRA is the most powerful tool for tax-free growth.
The earnings on the account grow 100% tax-free.
As the custodian, you'll have control over the account and can make decisions on behalf of your child.
The annual contribution limit is $7,000 for 2024.
A Roth IRA is the most powerful tool for tax-free growth.
The earnings on the account grow 100% tax-free.
As the custodian, you'll have control over the account and can make decisions on behalf of your child.
The annual contribution limit is $7,000 for 2024.
3. Parent Taxable Brokerage + Gift Tax Exemptions
One of the best ways to start building your child's wealth is by opening a parent-taxable brokerage account.
This account allows you to invest on behalf of your child.
Each parent can gift up to 17,000 per year to their child without triggering any gift tax.
That means a married couple can gift 34,000 annually.
One of the best ways to start building your child's wealth is by opening a parent-taxable brokerage account.
This account allows you to invest on behalf of your child.
Each parent can gift up to 17,000 per year to their child without triggering any gift tax.
That means a married couple can gift 34,000 annually.
4. 529 Plan
Contributions grow tax-free, and withdrawals are tax-free when used for qualifying education expenses.
Prepaid tuition plans also allow you to purchase future tuition credits at today's prices.
Plus many states offer state tax deductions or credits for 529 plan contributions.
Contributions grow tax-free, and withdrawals are tax-free when used for qualifying education expenses.
Prepaid tuition plans also allow you to purchase future tuition credits at today's prices.
Plus many states offer state tax deductions or credits for 529 plan contributions.
5. Hire Your Kids (Legally) to Reduce Taxes
They can earn up to $13,850 per year tax-free.
If you own a business, you can hire your kids to perform age-appropriate tasks and pay them a reasonable wage.
Not only does this teach them valuable work skills, but it also allows you to deduct their wages as a business expense, reducing your own taxable income.
And your kids can invest that money in their own Roth IRA.
They can earn up to $13,850 per year tax-free.
If you own a business, you can hire your kids to perform age-appropriate tasks and pay them a reasonable wage.
Not only does this teach them valuable work skills, but it also allows you to deduct their wages as a business expense, reducing your own taxable income.
And your kids can invest that money in their own Roth IRA.
6. Read Books to Teach Financial Literacy
One of the most important things you can do for your child's financial future is to teach them about money.
Reading books about money and investing is a powerful way to develop a money mindset for your child.
I recommended "The Automatic Millionaire" by David Bach and "The Simple Path to Wealth" by JL Collins as a good place to start.
One of the most important things you can do for your child's financial future is to teach them about money.
Reading books about money and investing is a powerful way to develop a money mindset for your child.
I recommended "The Automatic Millionaire" by David Bach and "The Simple Path to Wealth" by JL Collins as a good place to start.
7. Compound Interest + Time
One of the most powerful tools for building wealth is the magic of compound interest.
The earlier you invest for your child, the more time that money has to grow thanks to compound interest.
When you invest money, it earns returns.
Then, those returns get reinvested and earn their own returns.
The earlier you can start investing for your kids, the more that compound interest can work its magic.
One of the most powerful tools for building wealth is the magic of compound interest.
The earlier you invest for your child, the more time that money has to grow thanks to compound interest.
When you invest money, it earns returns.
Then, those returns get reinvested and earn their own returns.
The earlier you can start investing for your kids, the more that compound interest can work its magic.
8. Make your child a millionaire by 25:
1) Invest $150/week into an S&P 500 index fund when they're born and do nothing more
2) By the age of 25 this should grow to over $1 million due to compound interest
This is based on an 11% return, after the stock market's historical average over 100 years (with dividends reinvested)
1) Invest $150/week into an S&P 500 index fund when they're born and do nothing more
2) By the age of 25 this should grow to over $1 million due to compound interest
This is based on an 11% return, after the stock market's historical average over 100 years (with dividends reinvested)
9. Make your child a millionaire by 30:
1) Invest $11 a day into a S&P 500 index fund
2) Wait and let compound interest do all the work
3) In 30 years you should have over $1 million
This is based on an 11% return after the stock market's historical average over 100 years (with dividends reinvested)
1) Invest $11 a day into a S&P 500 index fund
2) Wait and let compound interest do all the work
3) In 30 years you should have over $1 million
This is based on an 11% return after the stock market's historical average over 100 years (with dividends reinvested)
Teaching children about money should be part of parenting because schools won't do it.
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