Building Generational Wealth: How to Invest for Your Child’s Future

Building Generational Wealth: How to Invest for Your Child’s Future

April 4, 2024

Many parents want to give their children a head start in life, financially. This guide dives into various investment options to help you build generational wealth for your kids.

Why Invest for Your Children?

Investing for your children isn’t about spoiling them; it’s about providing a foundation for their future. It allows them to pursue their dreams without the burden of student loan debt or starting from scratch financially.

Investment Account Options

  • 529 Education Savings Plan:  This account allows tax-free growth and withdrawals for qualified education expenses. Some states offer tax breaks for contributions. If unused for education, funds can be rolled into a Roth IRA (with limitations) for continued tax-free growth.
  • UTMA/UGMA Custodial Account:  Offers more flexibility than a 529 plan, but investments are taxable. Ownership transfers to the child when they reach the age of majority (18-25 depending on the state).
  • Custodial Roth IRA:  If your child has earned income, they can contribute to a Roth IRA. Contributions grow tax-free and can be withdrawn penalty-free.  Earnings withdrawals may be taxed and penalized.
  • Brokerage Account: This account can be in your name or your child’s (depending on the institution). Investments are taxable, but it offers more control over the funds.

Special Note for Business Owners:

If your child works in your business and receives a reasonable salary, you can contribute those earnings directly into a retirement account for them.

The Power of Compound Interest

Starting early allows investments to benefit from compound interest. Even small contributions can grow significantly over time.

By investing in your child’s future, you’re giving them the gift of financial security and opportunity. Remember, it’s never too early to start building generational wealth for your family.

Ready to build generational wealth? Book a Wealth Collaboration call today and let’s get started! 

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