Mississippi Money: Wealth Building for Your Kids!
By Ryder Taff
When my dad showed me that there was an entire section of the newspaper dedicated to stock market ticker symbols and share prices, I was hooked. The pages and pages of numbers fascinated me even if I had no idea what they meant at first. While you may not get the paper delivered anymore, you can still get your child learning about, and benefitting from, investing.
First you need to decide what sort of account is best for your child.
529 accounts are ideal if you want to save specifically for your child’s college education. Each state operates its own plan that may offers tax benefits to putting money in, allows the balance to grow tax free and is withdrawn tax free when spent on qualified higher education expenses (or some k-12 expenses). Check out www.ms529.com for more information on Mississippi’s plan.
An UGMA or UTMA account is a custodial account owned by the child but overseen by a parent or guardian. If their education savings are already in great shape, this is a good way to start them off in adulthood with an investment head start. Keep in mind that having a significant balance in a custodial account can reduce the amount of need based financial aid available when your student applies for college.
If you want to build their wealth in a custodial investment account, you’ll need to decide how to get it invested!
Individual stocks are a fun consideration when giving financial assets to children. After all, what child wouldn’t be thrilled with a share of Disney, 20th Century Fox or Lionsgate after watching the latest summer blockbuster (ok, is that just me?). If that would pique your child’s interest, use a discount broker like Charles Schwab or TD Ameritrade to open a custodial account and buy stocks.
Of course, the reason that we recommend investing is to participate in the profits and long-term growth of companies. You can do this without relying on your luck picking a winning company by buying a mutual fund or exchange traded fund that tracks a whole basket of stocks. Behavioral factors will have a big impact on your child’s wealth building also: keeping up a consistent savings habit, building a diversified portfolio and sticking with your plan when things get rough. You can get all of these things on the cheap with a robo-advisor like Betterment or Acorns. These sites will walk you and your young investor through the process and give you decent investment advice. Stick with the plan and your children will be on the road to a lifetime of building wealth!