{"id":35367,"date":"2023-07-13T21:18:39","date_gmt":"2023-07-14T01:18:39","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/lessons-learned-from-investing-for-my-kids-for-10-years\/"},"modified":"2023-07-13T21:18:41","modified_gmt":"2023-07-14T01:18:41","slug":"lessons-learned-from-investing-for-my-kids-for-10-years","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=35367","title":{"rendered":"Lessons Learned From Investing For My Kids For 10 Years"},"content":{"rendered":"
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Investing can do wonders if you have time and patience on your side. I\u2019ve seen this firsthand with investing for my kids over the past decade.<\/p>\n

As new parents, my wife and I heard over and over that the earlier you start investing, the better off you\u2019ll be. And since we wanted the best for our kids, we started from the moment they were born.<\/p>\n

Looking back 10 years later, I\u2019m so glad we did. Here are 5 lessons I\u2019ve learned from investing for our kids over the last decade.<\/p>\n

Lump Sum Investing Works<\/h2>\n

As soon as we got our kids\u2019 social security numbers, we plunked down a big chunk of money for their future college expenses. We went with a 529 College Savings Plan as we felt that was the best solution for our family.<\/p>\n

We contributed $10,000 for my daughter\u2019s college fund (in 2012) and $5,000 for my son\u2019s college fund (in 2014). The difference in the contribution amount was due to us having more available liquid cash when my daughter was born.<\/p>\n

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Given the difference, we tried to catch up so the accounts would become more even over the years. That extra $5,000 and the two years of additional compound growth in the market has made that very difficult.<\/p>\n

After years of growth, our daughter\u2019s 529 account now sits at around $50,000 (with 7 years until college time) and our son\u2019s account is around $33,000 with (with 9 years until college time).<\/p>\n

By contributing a large amount in the beginning, we took advantage of some incredible market growth over the past decade. We continue to contribute monthly, but those initial contributions really got the ball rolling for us.<\/p>\n

Automation Makes it Easy<\/h2>\n

After our initial lump sum deposits, automated contributions supported our kids\u2019 account growth each month. We\u2019ve budgeted a comfortable amount, set up recurring contributions and simply leave them alone.<\/p>\n

As our income increased (or decreased) over the years, we would adjust our contributions accordingly.<\/p>\n

While we loved investing for our kids’ future, we also wanted to make sure our future was taken care of first. We didn\u2019t want to end up living in their basement in our retirement years.<\/p>\n

We took advantage of our workplace 401ks, Roth IRAs and even Health Savings Accounts (HSA) for our comfortable future retirement.<\/p>\n

By setting up automation to work for our kids’ future as well as our future, we ensured we\u2019d hit both these family goals eventually.<\/p>\n

Invest with Purpose<\/h2>\n

With the college funds building up steam and our retirement funds doing the same, I started thinking about other ways I could invest for my kids’ future. After all, if investing early works well for their future college expenses, why not other important future goals?<\/p>\n

Home Down Payment<\/h3>\n

Starting with a generous $1,000 gift from their late-grandmother, I decided to start a UTMA brokerage account for both of my kids. These accounts are only a few years old at this point, but they are doing well.<\/p>\n

Both accounts have a bit over $2,000 total and could eventually serve as a home down payment fund in their mid 20s or early 30s. Hopefully with additional contributions, time and patience, it\u2019ll help them each get a healthy down payment and avoid some of the stress that can come with first time homeownership.<\/p>\n

Retirement<\/h3>\n

As the owner of a small family business, I have the opportunity to involve my kids in my work. They work as podcast co-hosts, photography talent and even help me by shooting videos.<\/p>\n

With this support, I\u2019ve been able to pay them a fair wage and I get to spend time with them doing work I love. This idea of family work-life integration is something that has been fun to explore lately.<\/p>\n

The Custodial Roth IRA has been an excellent way for us to help our kids use their earned income from our time together to save for their retirement needs. This way I get to work with my kids and help them create a comfortable future.<\/p>\n

Both of my kids have around $3,500 put away for retirement already!<\/p>\n

Compound Interest is Awesome<\/h2>\n

These three investing goals (college, future home and retirement) are many years or decades away. The longer we have until we actually need the money, the more compound interest can work its magic.<\/p>\n

To demonstrate this magic, let\u2019s use a compound interest calculator to give an educated estimate of where my kids’ accounts might end up. To keep the math simple, I\u2019ll assume $100 monthly contributions going forward, a conservative 7% real rate of return and use rounded numbers.<\/p>\n