Fri Jun 14 2024, by Tyler Gardner

3 Steps to Set Your Child Up for Financial Freedom

Here are three things I would do to set your child up for a lifetime of financial freedom. I'm Tyler, a former financial advisor and portfolio manager, and I create financial content for free to help guide your financial decisions.

1. Open a Custodial Roth IRA

I would go to E-Trade, Schwab, Fidelity, or Vanguard and open a custodial Roth IRA in their name. This process will take you about 15 minutes. Yes, even babies can be eligible for a custodial Roth IRA, as this account is based on earned income, not age.

2. Fund the Account with Earned Income

Next, I would fund that account with your child’s earned income. But Tyler, you might ask, how the heck is my child supposed to have earned income? As long as the work is safe and age-appropriate, they could be a W-2 employee for your small business, perhaps posing in your social media campaign, or they could work as a self-employed babysitter or dog walker. If you fund that account with a one-time contribution of $7,000 when they are 10 years old, they could potentially be a millionaire by age 59 and a half. And that’s just from a one-time contribution!

3. Educate About the Account's Value

Finally, remind them that this account is literally the gold standard of accounts, as decades of compound earnings are 100% tax-free after they turn 59 and a half. If they can’t wait that long to touch the money, they can withdraw their contributions at any time penalty and tax-free to buy a toy boat or a real boat. Additionally, after the account has been open and funded for five years, they can use up to $10,000 of the earnings penalty-free for college tuition or to put towards their first house.

If any of this is helpful, please like and follow, and I’ll keep trying to get you and your child one step closer to where you need to be.

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