Investing 101: How To Invest For Generational Wealth W/ Dominique Broadway

Hey, it's Dominique Broadway, award-winning financial planner, personal finance expert, and the founder of Finances Demystified. And today I want to share with you how you can start investing for your child. So you may have seen some of the recent press that we had about our million-dollar toddler, my daughter Dawson. And how we created an investment portfolio for her to be a millionaire by the age of 16. Although I'm pretty sure I can do it by the age of 13. But essentially, I want to share with you how we're creating that portfolio and how you too can also start doing the same thing for your children if it's something that you desire. So, imagine, imagine if you were given or gifted $50,000 or $100,000 at the age of 18 or at the age of 21 when you graduated college? Like, just think for a second. How would that have positively impacted your life? How would that have impacted your life? Would you have not had to have debt for college? Would you have been able to travel? Would you have been able to buy your dream home sooner? Or maybe just been able to put your energy into something that you cared more about instead of taking the job that maybe you weren't as passionate about. Believe it or not, you are all in a position to do that for your children. Time is on our side, especially if you have little ones. And even if your children are older, you can still put them in an amazing financial situation that will allow them to live the life that they want without having to do things they may not necessarily want to do. You are literally in a position to create that future for them. And you can start investing for your children with very, very small amounts. When I was a kid, well, a baby, before I was even really born, my grandfather started investing for me. Now, he didn't have tons of money at the time, but what he started to do was he started to put aside and save $25 a month, not tons of money, right? So he started to save $25 a month for me in Series EE savings bonds. So these are government-secured savings bonds that he would purchase through his paycheck because he worked for the federal government. So every month he would just have $25 automatically go and buy me savings bonds every single month. As his income went up, he would increase that amount. So maybe it went from $25 to $50 to $100 to $500, right? So, you don't have to start saving and investing with tons of money. By him doing that, by the time I got to college, it was time for me to go to college, I was able to go to college debt-free. I did not have to get any student loans for undergrad because he had started saving just $25 a month when I was 1 month old, okay? Because time was on my side. And by the time I got to college, I didn't have to get any debt whatsoever because he started saving and investing what he could afford at the time. And because I went to an in-state school, I also was able to go to college for a lesser amount and then had money left over to buy my first condo before I graduated college, just by him starting with $25. So if you feel like you don't have enough money to start investing, trust me, you do. My grandfather started with $25. I'm sure you probably have $25 a month, laying around and you can start doing the same thing. Now, the other thing that was on my side or that was on his side and my children's side was time. Time, time, time, right? So, my children now, I have an almost 2-year-old and a 3-week-old. They have time on their side. So, if I'm saving even $5, $25, whatever it is, we have time that next 18-20 years for compound interest to kick in and for us to take advantage of the market going up and down. If you're ready to start investing for your child, the first thing you need to do is open an investment account for your child. So there's a couple different ways you can do this. You can open a custodial investment account or a custodial savings account. So the difference between these two types of accounts is what you can actually do inside of the account. So a custodial savings account is going to allow you to just to save essentially cash. But the custodial term, turning you, the adult, into the custodian means that you are the person in charge of this money until the child gets of age in the respective state. So each state's of age is different, believe it or not. So you're going to have to actually Google to see when the custodian account is of age for your respective state. So you open up a custodial savings account if you just want to put cash aside, which is one thing that we've done. But then also opening up a custodial investment account. So a custodial investment account is going to allow you to actually start investing for your child. Inside of this investment account, you can buy stocks, you can buy bonds, you can buy mutual funds, you can buy options in some places, um, or you can even buy ETFs, right? So you can literally start investing for your child as soon as they get a Social Security number. Literally, as soon as they get a Social Security number. So you can open up these two accounts for savings and investing. Now another place that you can start investing for your child is in a minor Roth IRA. So a minor Roth IRA is great if your child is earning income. So as long as your child has earned income, they can start contributing to a minor Roth IRA, which means they can literally start saving for retirement while they're still children, while they're still minors. That's huge, okay? So, example. Our daughter Dawson, she's currently 2 years old. She's about to be 2 years old. She works for our company Finances Demystified. So, she's essentially like a model/brand ambassador for the company. So, we use her face and likeness in presentations. We use them in ads. And she's also coming out with some financial books and stuff like that. But she has to get paid. So because she gets paid for working for us, she has earned income. So she is about to be 2 years old and she already has a fully maxed out Roth IRA for the first 2 years of her life. Now with the Roth IRA, just like with a regular Roth IRA, with a minor Roth IRA, you can contribute $6,000 a year to the Roth. So for her first year of life, we contributed $6,000 and second year of life, another $6,000. So she already has, $12,000 contributed to her retirement account and her minor Roth IRA, not including all the gains that she gets because the money is in investment. So that's another thing that you can do. On top of that, you can also open what they call a 529 college savings account. So you can go to whatever state you live in because each state has their own college savings accounts and open up a 529 college savings account for your child. So example, I used to live in Maryland. Maryland529.org is where you would go if you live in Maryland or DC. I think it's like DCcollegesavings.org. Virginia has like Virginia529.org, but make sure you Google for your own specific state. One, you get federal tax deductions. Also, most states also have state tax deductions that you're eligible as well, or state tax credits for contributing to the 529 plan. And some states are also doing matching programs where if you put in $500 or $1,000, they will literally match it and give you the $500 or $1,000 as well straight into your kid's college savings account. Now, only open college savings accounts if you think your child will go to college, okay? Because if you use that money in the college savings accounts for anything other than college, you have to pay a penalty. So we personally do not have college savings accounts set up for our children at the time because our children are so young and I am honestly not super confident if college will be as important 21 years from now as it is right now. So we have decided to not contribute to a 529 college savings account for our children and instead are just over-contributing to the other accounts because we don't necessarily think that we may need them. But everyone is totally different. And if you think your child will go to college, especially if your child's closer to college age, it's another great place for you to contribute and start investing. Now, another thing with College 529 savings accounts is that they're very set it and forget it. Meaning when you decide how much you wanna contribute, so let's say if you're like, hey, I wanna do $50 a month to a College 529 savings account. You send them the $50 a month. I would have it set up to automatically go so you won't forget, but have it set up to go automatically. They'll take that money and automatically invest it and put it into a portfolio for you. Now, the portfolio that they pick for you is typically going to be decided based on what you fill out as a questionnaire, meaning how old your kid is, when your kid is planning to go to college or use the money, and also what your risk tolerance is, meaning how risky are you? Do you like to see the market go up and down? You're like, "No, I'm a lot more conservative. I don't want it. I don't want my money to be fluctuating." Okay? So, they're very, very set it and forget it. Some of the other accounts that we mentioned, like the Roth IRAs and the college investment accounts, you can either put the money into a portfolio and make it, set it and forget it, or you can kind of play around and invest with the money like what we do, which is another reason why our daughter is on track to become a millionaire by the age of 16 is because we trade within her accounts. We trade options, we trade stocks, and we're able to grow that money a lot quicker, right? Instead of it just sitting in mutual funds. Another thing I want to add is to make sure that you're consistent. Consistently saving into these accounts, okay? Now I have ran an illustration when my daughter was 1 years old just to see if I started investing $50 a week, just $50 a week, which equates to $200 a month from age 1 to age 21, how much money would she have? So if I, based on this illustration that I ran on the Acorns website, and if you guys are interested in opening up an Acorns account, for your child, I have an affiliate link below that will give you $5 for free for signing up and opening up an account for your kid. So use the link below. So the illustration said that if I did $50 a week, which is $200 a month, age 1 to age 21, by the age of 21, with $200 a month and having this money going into mutual funds, Dawson would have about $116,000. That's amazing. Like I said earlier, imagine if you got $100,000 at the age of 21, how that would have impacted your life, right? So as you can see, it doesn't take tons of money to start investing, right? But make sure you're doing it and you're doing it consistently. Once you decide which accounts you want to actually have open for your children, set aside a certain amount every month to go into these accounts. We've set aside a certain amount, a few thousand dollars every month to go into accounts for our children, which is going to give them the financial stability later on in life, and they'll have retirement accounts that are fully maxed out, and they'll also have other investments that are growing for them. Now, I understand everyone can't afford to do all of these accounts, right? Perfectly fine. So if you have to do just one, right, figure out what is best for you. If your child has earned income, go with the Roth IRA. If you just want to start investing, open up a custodial investment account. If you're really, really, you know, keen on the college thing, go with a 529 account. The most important thing is that you start, you start now, and you do something. Take action. You're going to thank yourself and your children will definitely thank you as well. To get more information on how to actually start investing, for your child, use the link below to sign up for our next free investing masterclass where I share with you how to start investing and how to start building wealth for the next generation. And also, if you like this video, please make sure you like, subscribe, and click the little bell so you get notifications when we drop our next video. See you soon.