Hello, beautiful people from across the lands. Tis the season to be preparing for financial well being! Lumps of custodial accounts for all the kiddos! This title is a little misleading as my kids have actually never got anything for Christmas. Gasp! Scrooge you! Calm down they are fine and well cared for. It was a spiritual choice I made before I had children to stop celebrating Christmas. I have not celebrated Christmas for over 10 years now but that’s another story for another day. It is NOT my goal for you to stop buying toys for your kiddos on X-Mas. It is my goal to expand your financial literacy on setting your kids up for financial success. Let’s get into it!
What is a custodial account?
A custodial account is a type of brokerage account you can open on behalf of a minor (18 or 21 depending on the state) that you manage. With this account, you have the ability to invest in stocks and mutual funds. Once they are of age they will become the beneficiary of the account taking on the full responsibility of the assets. This is a great way to teach your child about the beginning basics of investing.
Toys Depreciate
How many times have you bought your child a toy and it went up in value after you purchased it? Very rare, especially after it’s taken out of the box. Now I am not being a mean mommy and saying no toys ever. I just think it’s wise to make sure your kid’s assets outweigh their possessions. “Possessions depreciate assets appreciate”
For example, if you spend over $1k for your child on toys but there is no savings or investment put in place to position them for financial stability you’re doing it backwards. This is how we can build generational wealth now. Investing in your child’s finances early puts them light years ahead than you and I ever were at their age. If you can spend $50, $100, or more on toys you can invest in your child’s financial stability.
Custodial Accounts Accelerate
Unlike savings accounts, custodial allows you to invest in a variety of things that have a higher interest than a traditional savings account. There are two types of custodial accounts that function differently in the assets you can acquire in them. The Uniform Transfer to Minor Act (UTMA) account or the Uniform Gift to Minor Act (UGTA) account. The UTMA account allows you to hold any type of assets from real estate, intellectual property, and works of art. The UGTA is limited to cash assets like stock, bonds, and mutual funds.
Action Steps to Take NOW
1st Step: Sit and write down the financial goals you want to build for your child/children
2nd Step: Do some research. Start with reading this blog post on How To Invest for Beginners
3rd Step: Be sure to include your kiddos in the process so they are learning along with you
Conclusion
A journey to financial independence does not stop with you but should continue beyond you. Simple strategies that many million and billionaires have put in place are the same strategies we hundred and thousandaires can do as well.
For a long time investing was a foreign language to me. It was something I saw as complicated once I started my personal finance journey. The more I learn the more I realize financial stability is obtainable and I can begin to break the curse of poverty among my family tree. So can you. Take one step at a time not allowing lack of knowledge to keep you from taking action.
Until next time dream, believe, and achieve.
