Financial Literacy: Invest for your kids future

Updated March 24, 2023

The moment that a baby is born, parents can’t help but make big plans for their little’s future.  First haircut, first birthday party, first day of kindergarten...it's natural to want to make the most out of every milestone moment.  But the real work happens behind the scenes.  Parents can take simple steps to set their children up for financial success and security, and the key is to start early and often.  

Set Up a Family Financial Plan

Setting up a financial plan for family life should be a tippy-top priority.  Seems daunting, right? It doesn’t have to be.  Check these three items off your to-do and get started in building a financial foundation for your family.  

Plan for Your Child’s Educational Future 

In 18 years, college will cost nearly half a million dollars per child.  Yes, you read that number right.  The solution to this staggering sum is to start small and start early.  By opening up a 529 plan, parents can slowly chip away at that colossal number.  These tax-advantaged savings accounts help parents fund both K-12 and college educations and are available in all 50 states.  “Whether parents can invest $10 or $10,000, the benefits of compounding and tax-free growth are profound.  There is simply no better way to invest in your kids than by planning for their education,” says BT Co-Founder Carissa Jordan.

Set Up a Digital Investment Account For Your Child

Invest wisely in your little.  It’s time to bring our kids into 2021 by setting up a digital investment account in their name.  Innovative apps like Early Bird make it easy for parents, grandparents, godparents, etc, to directly contribute to a child’s growing nest egg.  The sooner you turn those cash gifts into investable dollars, the better. 

Let compound interest work its magic and by the time your babe reaches 18, she might have a sizable amount to her name.  “While there is no doubt the best things in life are free,” says Nikki Boulukos, Co-Founder of BT, “building a financial foundation for young children helps them know their worth, no matter what path they choose to take in life.” 

Open an IRA 

If your child has earned income, it's never too early to think about saving for the future.  From the moment your dog-walker starts walking or your young tutor starts teaching, it’s time to open a traditional or Roth IRA in their name. 

Large financial institutions such as Charles Schwab, Fidelity, and T.D. Ameritrade allow customers to open custodial retirement accounts for minors.  Both traditional and Roth IRA’s are tax-advantaged ways for kids to grow their dollars for retirement, first homes or educational expenses.  Roth IRAs might be a preferable option, as kids invest taxed dollars and will therefore owe no income taxes when they withdraw the funds decades down the line and are presumably at a higher income bracket. 

A little goes a long way.  Assuming a 7% rate of return, just $100 invested at age 18 can grow to over $3,000 by retirement. Even better, $100 invested every month could be worth over $500,000 by retirement age.  

The Takeaway

Whether it's setting up a 529 plan, opening an online investment account for your kiddo, or establishing an IRA, the time to start is now.  Compounding interest is a powerful factor, turning even the smallest investment into a meaningful one down the road.  Go ahead, and get banking on a bright financial future for your kiddos.

What does our family do to plan for our financial future?