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Give Them a Head Start
When it comes to setting your children or grandchildren up for financial success, time is on your side. The power of compound interest and the potential for long-term market growth can make a big difference in their savings over time. It's never too early to start, and even small, regular contributions can add up over time.
When you involve older children in these decisions, you're not just saving for them - you’re teaching them financial literacy skills that will benefit them throughout their lives. You'll be instilling a savings mindset and building a strong foundation for their future success.
When the time is right, we’d love to meet with you and your children or grandchildren to explain their investments, how the market works and why saving for the future is so important.
Investing for College
A 529 College Savings Plan is a tax-advantaged way for parents and grandparents to invest in a child’s education. When the money is used for qualifying education expenses, withdrawals are free from both state and federal taxes. Plus, many states offer tax deductions on contributions.
Examples of qualifying expenses are:
- Tuition
- Books
- Supplies
- Room & Board
Investing for Your Child's Future
If you’re looking to save for more than just education, consider an investment in a UTMA or UGMA account. This flexible option can be used for many future expenses - from your child’s first car, their education, wedding, or even a down payment on their first home.
Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts offer a lot of flexibility with few restrictions. As the custodian, you’ll manage the account until your child reaches the age of majority - 18 in Michigan or 21 in Ohio - at which point they’ll gain full control of the funds.
These accounts can be a great way to start investing for your child, while teaching them about the market and the importance of saving and investing.
Investing for your Child's Retirement
You never hear anyone say they wish they had started saving later in life for retirement - they wish they had started sooner. You can help make this a reality for your kids.
As soon as your child has earned income, whether from a summer job or other work, they can contribute to a retirement account. If your child begins contributing to a Roth IRA during their teen and college years, they'll have tax-free income in retirement if they let the funds grow without taking withdrawals.
A Roth IRA for kids is called a custodial Roth IRA, where the parent (custodian) opens and manages the account for the child. Once your child turns 18, they'll take full control of the account.
Starting early not only gives them a head start on their financial future but also teaches them the value of saving and investing from a young age.
Balance Investing for You and Your Kids
While investing for your kids' future is important, make sure you don’t forget about your own finances. If you aren't contributing enough to your retirement accounts or don't have an emergency fund, focus on those goals first. Your kids can take out a loan for their car or college, but you can’t take out a loan for retirement.
Striking the right balance between your own needs and your children's is key to achieving long-term financial security for the whole family.