Ways To Invest In Your Children

Ways To Invest In Your Children

December 03, 2020

Investing in your children is one of the best ways to set them up for success later on in life. Here are several ways you can invest in your children today to benefit them tomorrow and beyond. They’ll thank you for it later, we promise!

Education Investments

College isn’t getting any less expensive, and the student debt crisis is crippling young adults in their twenties, preventing them from achieving typical financial milestones, such as buying a home. If you anticipate your children attending college, establishing a 529 plan or Coverdell Education Savings Account (ESA) to save for their education will help prevent them from falling into massive amounts of student loan debt. Both of these plans allow you to make contributions on your children’s behalf that can later be used for qualified educational expenses when the time comes. 

Although both accounts help you accomplish the same goal, there are a few distinct differences between them. 529 plans offer more flexibility and higher contribution limits, while Coverdell ESAs can be used to pay for qualified K-12-related expenses. One may be more beneficial than the other based on your tax and income situation as well. Talk to a financial professional about figuring out which one is the right fit for you and your child.

Retirement Investments

Another great way to invest in your children is by helping them save for retirement. You can do that by establishing a custodial IRA or Roth IRA in their name. Depending on which state you reside in, ownership of the account gets transferred over to your child on either their 18th or 21st birthday. To open a custodial IRA, your child must have earned income throughout the year. Whether they are working at a local burger joint, delivering newspapers, or babysitting for your neighbors, no contribution is too small, and it is never too early to start saving for their retirement. 

Which type of IRA should you choose? Many investors choose to establish a Roth IRA for their children, so the savings will not be taxed upon distribution. However, it is best to consult with a qualified financial professional to determine which one is best for you.

Teaching Children Saving & Investing 

One of the best ways to teach your children about the positive benefits of saving and investing is to get them involved. Establish a custodial brokerage account so they can see the power of long-term investing firsthand. Just like with a custodial retirement account, a custodial brokerage account will remain under your control until your child reaches the age of 18. With your child, research one or two companies involved with something they are passionate about, and invest in a few shares of their stock. Provide diversification by adding low-cost index funds or ETFs to the portfolio. Finally, you could help your child invest a regular portion of their allowance into the portfolio to establish some basic savings and investing habits.

Get Started Today

We know you want the best for your children. Taking steps now to invest in them is beneficial for setting them up for success later—whether that’s helping them pay for education, funding retirement, or simply helping them establish good financial habits they can rely on throughout adulthood. Want to start investing on your children’s behalf? At Haydel, Biel & Associates, you’ll get unbiased answers to your questions from a team you can trust. Contact us at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.

About Haydel, Biel & Associates

Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.

The commentary on this blog/website reflects the personal opinions, viewpoints and analyses of the Haydel Biel & Associates employees providing such comments, and should not be regarded as a description of advisory services provided by  Haydel Biel & Associates or performance returns of any  Haydel Biel & Associates Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Haydel Biel & Associates manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.