Fri Jan 24 2025, by Tyler Gardner

Two Essential Accounts Every Parent Should Open for Their Child

Hello, I'm Tyler, a former financial advisor and portfolio manager. Today, I'm sharing invaluable advice for all parents looking to secure their child's financial future.

1. Open a Custodial Roth IRA

One of the first accounts I recommend is a custodial Roth IRA. You can establish this account for your child even before they have earned income. You can fund it with the lesser of their earned income or the annual contribution limit. With numerous opportunities for your child to work within your small business, this strategy is a no-brainer.

2. Establish a 529 College Savings Plan

The second account is a 529 college savings plan. This account allows you to superfund it, gifting up to $190,000 tax-free between you and your spouse at the time of your child's birth. Considering the rising cost of college—potentially close to a million dollars in 18 years for a liberal arts degree—this is an essential step to ensure your child can afford higher education.

Bonus Tip: Teach Delayed Gratification

Lastly, instill in your child the value of delayed gratification. The well-known Stanford marshmallow experiment demonstrated that children who resisted the temptation to eat one marshmallow now to receive two later tended to achieve better academic performance, social skills, and self-control. These habits are crucial in helping them make more money and maintain it in the future.

If you find this information helpful, please like and follow for more tips to guide you on the path to financial success!

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