This is the second article in a series discussing using the new monthly child tax credit distributions as the basis for investing in your children and their futures.
Let's get the more conventional investments discussed and out of the way before moving on to the cool stuff.
As mentioned in the first article there are any number of books, financial advisors, and other resources who can help you with the more conventional investments for your children. I do want to touch on them here for completeness' sake as well as pointing out a few details you may not know about.
Education Funds
The venerable college fund has seen some enhancements lately. This money can now be used for home schooling, trade schools, and certain educational expenses. There are also some tricks that can be pulled with beneficiaries.
What Can a 529 Be Used For? https://www.capitalgroup.com/advisor/insights/articles/529-plan-uses.html
Can Homeschoolers use 529 Plans? https://homeschoolcpa.com/can-homeschoolers-use-529-plans-maybe/
As with most investment vehicles of this type the value compounds rather slowly and is not protected from any market disasters that may come just when the educational expenses become the largest. As such educational funds are generally going to see the most value when heavily-funded from a young age and given a long time to grow.
IRAs
The Individual Retirement Account is familiar to everyone. Most of us have them and wish we could have started sooner to take advantage of market growth over a longer time. What if you could have started before you went to school?
No-one is too young to have an IRA opened in his name. The only trick is, it must be funded with earned income. You can't just put money into a child's IRA; he must earn the money with a job paid at the going rate.
Roth IRA for Kids https://www.fidelity.com/retirement-ira/roth-ira-kids
Chances are your child can perform basic work around the house for pay that you can transfer into the IRA. You're going to have to document it well enough to satisfy the IRS.
I'm not convinced the economy as we know it will be around for our kids to draw meaningful retirement funds from IRAs but the option is there.
Conventional Accounts
If you are not interested in navigating the details and limitations of tax-advantaged accounts you may be interested in opening a conventional account for your child and making regular investments to be handed over when you decide your child is old enough. Best of luck navigating the markets.
Conclusion
Whatever you choose to do, it is important to bring your children into the process when they are old enough to learn. Money is serious business and many fortunes have been thrown away by those who do not appreciate the effort and care taken to assemble them.
While the more conventional forms of investments are not exciting there is a lot to be said for them. We do rely on money for quite a bit and that is not going away soon. There are more ways of investing than mentioned here. If you are interested go out and look for them.
Did I miss anything important?
From here on out we will look at more unusual ways of investing in your children.
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