Building an Investment Portfolio for your Kids on a Budget By Marlo Richardson
Investment portfolios probably don’t rank too highly when it comes to lists of topics that kids discuss on the playground or in the lunchroom. However, given what is known about compounding interest and getting an early start with investing, building a portfolio early is becoming more commonplace.
A Little Goes A Long Way
It is still a pervasive myth that to invest, either for yourself or your kids, you need to be wealthy, to begin with. But, you can start an investment portfolio with a few hundred dollars. This low barrier to entry makes kicking off a portfolio for your kids relatively easy. Compounding interest is how people turn a small initial investment into a robust portfolio, setting kids up for a solid financial future.
Compounding interest is the interest earned on interest. When you set up an IRA or a mutual fund account for your child, the compounding interest is how your initial investment grows.
Investing on a Budget
As mentioned, you don’t need thousands in the bank to kick off an investment account for your kids. Parents can start saving for their children’s initial investment even before they are born. The easiest way to earmark funds for your children’s accounts is to make it a line item on your budget. Setting aside even $50 to $100 a paycheck towards an initial investment is enough to build an excellent financial foundation for your children.
Making investment funds a part of a family budget can also be a great way to teach children good money management skills once they get older. Getting your children to participate in the money management and investing process is the best way to instill lifelong financial literacy skills.
Where to Invest
Investing can be confusing, and knowing where to invest funds can be overwhelming. There are many options for people to consider when looking to set their children up for a strong financial future.
– Custodial Accounts – A custodial account is one where the account is in your child’s name but is overseen by you. You make the decisions for the accounts as the guardian until your child reaches legal age, typically 18 or 21, depending on the account stipulations. Suppose you begin the investment account early enough and make regular contributions. In that case, you could realistically set your child up to have hundreds of thousands of dollars by the time they are ready to head off to college, all through compounding interest.
Other family members can also contribute to these accounts of up to $15,000 without triggering a gift tax.
– Child Investment Accounts – These accounts include 529 plans designed to save for college and other tax-free education expenses. 529 plans offer high limits on amounts that can be invested and limits tax liabilities for parents, so they can be a great investment option for kids.
There are other educational savings accounts as well, such as Coverdell ESAs. Some educational savings accounts can also be used for qualified K-12 expenses.
– Traditional and ROTH IRAs – IRA means “Individual Retirement Account” and they are accounts that come with tax advantages. Because you have to have an earned income to open and contribute to traditional or ROTH IRAs, they are typically a better choice for young adults just getting started in their careers. However, parents can open a custodial IRA for their children to teach them about investing and give them a head start. If, say, a teenager is earning money from a summer job, this may be a great way to start investing their own earned money.
Even if your family is on a tight budget, starting an investment portfolio for your children should still be a consideration. A small start can set them up for a lifetime of financial stability and open up a world of options for them once they reach adulthood. For more information visit https://marlorichardson.com.
Bio: Marlo Richardson
Marlo is known as a dynamic leader, business professional and as someone who has made her mark in many industries. She is a regular disrupter, often carrying the title “First African American Woman to”. Marlo has been a Keynote Speaker, business advisor, and is often invited to speak with local business groups and universities regarding her personal story and experiences in the business world.
As a young girl, Marlo knew she had an interest in helping others. She was able to accomplish this through roles within charitable organizations, law enforcement, and politics. After facing gender and racial discrimination when working for the LAWAPD, Marlo decided she wanted more financial freedom and to be her own boss. She transitioned out of working the traditional 9-5, overcoming various hurdles in the process and took a leap of faith into entrepreneurship. She knew doing so would also create generational wealth which was important for her.
Richardson has owned business franchises, restaurants, a home health care agency, a real estate investment company, insurance agency, retail clothing, travel agency, security company, production company, distribution company, manufacturing company, marketing company and has created several successful brands. Currently she focuses on real estate, crypto, is one of the few license holders to grow and operate a cannabis grow op and is a financial expert advisor.
She is the founder of Business Bullish, a website and resource that seeks to train people in the areas of financial literacy and entrepreneurship. She is a dynamic business woman and leader and is also a keynote speaker and business advisor who shares with local businesses her success stories in hopes that they can replicate her growth.
She also takes time to speak before many organizations, universities, and corporations. She speaks on topics such as leadership, motivation, work, entrepreneurship, and innovation. The business advisor and speaker regularly accepts bookings to some of the most prestigious institutions and organizations in the country.
Business Bullish comes as a passion project of Richardson, after realizing the lack of resources that help people invest and grow businesses. Moreover, the resource is completely free, as the business guru looks to help as many entrepreneurs as she possibly can. In the future, she hopes to create a strong community and network of business owners who can share insights and ideas to help each other flourish in their respective fields. She hopes to create an avenue where people can share business ideas and get feedback from the Business Bullish community.
As a working mom with numerous brands under her, she seeks to share her knowledge on finance, business and demonstrate women really can do it all.
Thank you,
Glenda, Charlie and David Cates
