My children are turning 4 and 2. I and my wife know little to nothing about investing. All we have is a savings account for a rainy day, some crypto (btc and eth), and a Roth IRA that we need to be better about contributing into. I have tried to learn about other ways of investing but it is all too over my head; that, and it seems/feels we do not make enough (given our salaries, taxable income, medical benefits, mortgage, daycare, etc.) to start other accounts or take risks. I managed to save $3K of my own money that I want to do something with for my kids, but it seems much out there may not yield enough earnings over time unless I can keep contributing into or, because my children are young and do not have an income, that I cannot open certain accounts on their behalf . . .

How would you all approach this? Do I need to keep saving and wait until they are old enough? What would you do or look into?

Thanks!

PS: The Roth IRA that my wife and I have started is through Vanguard

Stock market index funds are a safe long term investment.

Real estate.

What's the point of the investment, college, retirement, home buying, wedding, etc?
I focused on college and have a Fidelity 529 account for each of them.

The BEST education on investing you can provide for your kids, is to make some time to educate yourself.  Investing is NOT complicated.  People make it complicated.

If you can read a book, you can manage your own investments and goals.  I am not trying to be mean nor offensive, but you might be making excuses about it being over your head, unless you just dont know where to start.

https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926

The above is a great book, in simple English, written by a man who originally started this as teachings for his own daughter.


For my kids, I started them understanding finances around age 5.  We got 3 mason jars, we let them decorate them for fun, and we labeled them "Give, Save, and Spend".

We let them earn money for doing work around the house, and they use the same system when they are gifted money.  They help me rake leaves, trim trees, clean up the pool or backyard, etc.

10% goes in give FIRST, then I want to teach them to try and love on half what they make.  So 50% of the remainder goes in SAVE, then the other half goes in SPEND.

SAVE is for saving up for a car, college, etc.  They know they will not have access to spend this.  Spend is for whatever they want, whenever they want.  If they ask for something in a store, the answer is always 100% no, unless they planned ahead and brought their money, then they can make choices if they can afford whatever.

At age 9, I opened 2 taxable brokerage accounts in MY name (they are too young to have their own and I didn't want to mess with custodial accounts) and we started teaching them about investing in stocks.  After explaining the banks, interest, and growth, my son chose 100% total US market index fund (VTI/VTSAX/FSKAX) and my daughter chose 75% total market index fund, and 25% money market fund.  I let them choose.

When they are 13, I will open a Fidelity youth account which will give them a debit card and their own parental advised investing account.  We will also open custodial ROTH IRA's at this time and start them investing for retirement.


But to start, you just need to have conversations about money, and the importance of giving, saving, investing, and control in their spending.  It is a journey.  They don't understand it all so we break it into bite sized conversations over time.

Putting it in a basic savings account is a waste of time.  That's what my parents did, and it did not teach me anything except how pitiful bank interest is.

----------------------

Now, if you mean taking YOUR money and investing it for your kids education, that's easy.  If your state offers a break on your taxes for contributions to a 529, use that.  Otherwise, put it all in a taxable brokerage account, and invest in a total market index (VTI) and a total bond market index (BND).  Start with a 90/10 mix, and gradually move toward a 50/50 mix as they near the time they will need access to it.  

Everyone, honestly -- THANK YOU!!!

Yes, I think that's what it is; I don't know where to start. When I would look into something, there's then too many options on how much to contribute, stuff with interest rates and taxes depending on age and salary, etc. I'll keep learning. It's just a lot when you've never been taught this or took classes in it -- my parents did the same thing, savings account when I was young and it too taught me nothing nor left me with anything. That's why I want to help my kids invest. I just want them to have something for when they're young adults (20s/30s) and maybe retirement that leaves them better off than me and (no offense) most people who don't teach their kids about money or get them involved somehow.

To recap: I'll look into ETF. A couple of you mentioned Stock Market Index Funds (VTI/VTSAX/FSKAX). Real estate was another one that I have looked into. It seems simple. I just need to front the money down on most properties it seems. As for the Custodial Roth IRA -- yes, that one really intrigues me. I looked into it and was bummed that (my understanding) is whoever the account is technically for needs to have some proof of income? So that one seems be a "waiting game" until my kids are old enough it seems.

Thanks again everyone! You honestly eased my nerves. By all means, keep the suggestions or thoughts coming.

You have been given good advice about stock ETFs.  I see real estate was also mentioned.  While real estate can be a great investment, it is not well suited for your case.  Some one has to manage real estate and with children whose age is in low single digits it is obviously not going to be them managing.  Most real estate investments use leverage, not usually appropriate for young children.  You can purchase REITs, (real estate investment trusts), from your stock broker, this involves tax considerations.  That would be the only real estate approach I would consider for young children, and I doubt I would do it.

Best of luck, you are doing a good thing.

This.  For now make piggy banks and give them quarters for chores or something.  
When they're older get a custodian-style bank account and make them go to the bank.  
By the time they're a teenager get them a pre-paid credit card so they learn to keep track of what they spend.  Make them save some fraction of all money they get in their bank account.  

Beware of "investments" that wind up locking your money away when your kids are so young.  
ie. You make a 529 account and put tons of money into it.  Your kids might not go to college, they might die, or any of a number of other things that make that 529 money difficult to access.  

Most importantly, money is like the oxygen masks on a plane - if you don't put your mask on first you won't be able to help your kids put their masks on.  
Get your financial life to where you're satisfied with it before you worry about the finances of your toddlers.

Either an S&P 500 fund/ETF or a Total Stock fun/ETF. Dump some money in on a regular basis and don't look at it too often.

You should look into whether your state has a college savings plan. I did this for all three of my kids. I donated into each account from my refund and it locked in the tuition rates from when I started. My youngest was able to use the funds out of state as well as several states have collectively agreed to participate in the program. It saved my kids a lot of money with a very small contribution on my part.

The best advice I can remember is to apply 1/2 of each raise in salary to a stock fund for your kids. You will not miss the money and will likely be surprised after 15 or 18 years how much your kids have accumulated.
Good luck and good for you.
The folks who have told me they can’t retire because their kids are in/going to college. Surprise? Who knew they would turn 18 one day?

The best gift you can give your kids is not having to live with them when you are old because you didn’t manage your money. Put the oxygen mask on yourself first.

The second best gift is to teach your children how to be smart with their money. Teach them to fish so to speak.

I’m not a fan of “gifting” money to kids. They need to be self sufficient first (yes, I know they are only 4 and 2 but I’m talking long term. Kids that are given money often come to expect it, and can become lazy and unmotivated.

Set yourself up for financial success first. Make your kids capable of being financially successful on their own. When those things are in place, what you give them financially be used well.

All 4 of my kids will be millionaires on their own. They each opened a Roth IRA as soon as they started getting income. That was not negotiable. When they could see their investments growing, they got excited and kept doing more and more. At 16, it takes so little to become a millionaire. Time does wonders.

Effective this year, $35k from a 529 can be used to fund a Roth IRA.  The kid still has to have earned income and still can't exceed the $7k maximum annual contribution, but this eliminates a lot of the "what if my kid doesn't go to college" issues.

OP, what we did for our son as soon as we got his SSN was set up a 529 and a custodial brokerage account for him with Fidelity.  I have a little bit set to transfer to each of these accounts each month.  I think the 529 was somewhat limited on how I invested it, so I went with a target date fund.  He's on track to have four years of state tuition and expenses covered.  The brokerage account is all invested in an S&P 500 fund, either SPY or FXAIX.  Our one year old has just over $14k between these two accounts.

I'm typing this with my one week old son laying on my chest.  I intend to do the same for him as soon as we get his SSN.

529 is mandatory now, just about.

check with your state about tax advantages. try to pick the best one for you  and try to pick the SP500 if available.

for yourself-
ramp up an Roth and a personal fund preferably a trust account.

529 account.   Invest in the one thing no one can take away, education.

I heard Dave Ramsey is the popular choice for the poors.

My parents (Dad) didn’t save any money for me.  I worked through school, went in state and graduated college with almost no student debt.  It was probably the best thing for me, I don’t ever expect anything from anyone.

I have Coverdell accounts for both of my kids.  I bought Apple stock several years ago in a dip and it's really increased in value.  I've also been buying VOO in those accounts.

I bought gold in 2009 at just over $1000 an ounce. Today it is worth $2034.

Gold is not an investment, but it's the best wealth preserver of all.

https://i.imgur.com/ycgBQas.jpg

$1000 in an S&P500 index fund in 2009 would be worth $6889.  Source

Gold - while keeping up with inflation, is terrible by comparison.  It is great if you like sitting still.

Agreed. That's only about 4.8% growth per year on the gold.

LLC and buy as many houses as you can. 2 houses in an LLC even if only breaking even now, could set up someone really well to start their life in 18 years or so.

Dividend stocks are my focus for them

FPNI - Put in  VTI and let it  grow.

Look  at ways to reduce Taxes but main thing is get it  in a ETF and contribute regularly  and leave it be.

Real estate is a powerful investment, particularly because you can easily apply financial leverage to it, but there is an issue of timing.  Not all markets are buyers markets and I don't think right now is a buyer's market.

For the 10 years prior to COVID, you could hardly go wrong but there is at least the possibility that we've reached a peak and we will need to wait for another reset before housing is setup for another run like we just had.

This ratio below should rationally oscillate between some minimum and some maximum over the long term.  It's not the case that it can keep going up forever unless you want to argue negative interest rates at some point to somehow make the math work that people can afford to buy a house that is 8x, 9x, 10x or more of their income.

Attached File

If you like to gamble then go for it. I do what the banks are doing, not what they say.