The moment that a baby is born, parents can’t help but make big plans for their little’s future. First haircut, first birthday party, first day of kindergarten...it's natural to want to make the most out of every milestone moment. But the real work happens behind the scenes. Parents can take simple steps to set their children up for financial success and security. The key is to start early and often.
Setting up a financial plan for family life should be a tippy-top priority. Seems daunting, right? It doesn’t have to be. Check these three items off your to-do and get started in building a financial foundation for your family.
1. Invest with EarlyBird for your little
The best thing parents can do to prepare for their babe is to get banking on a better future. First step? Get the worm by adding EarlyBird to your baby registry so friends and family can get on board investing for your little from the start. Through EarlyBird, parents can seamlessly set up a custodial investment account, also known as an UGMA, that will grow under the parents’ discretion until their child reaches 18 or 21. EarlyBird does all of the hard work. They make it easy for parents by matching risk tolerance, core values and investment philosophy to ensure the best long-term portfolio growth. Even newbie investors can painlessly establish a traditional portfolio, or diversify with crypto, that takes a long-term investment horizon view without worrying about short-term volatility. “The benefit of EarlyBird,” says Benjamin Talks Co-Founder Nikki Boulukos, “is that parents, grandparents, godparents, and friends can easily contribute to a child’s growing nest egg starting at a Baby Shower, and continuing to any milestone occasion throughout their childhood and beyond.”
When it comes to financial gifts from friends and family, no matter how big or small, some portion should always be put aside for the future through EarlyBird. With the benefit of time and the magic of compound interest, even the smallest contributions can grow into a sizable nest egg. “I opened an UGMA savings account for each of my children right before their baptisms,” says Benjamin Talks Co-Founder Carissa Jordan. “I knew generous family members might bring cash gifts to the celebration. Once the savings accounts were funded, we moved most of the money over to investment accounts so that the money could start to work for my kids.”
“I knew generous family members might bring cash gifts to the celebration. Once the savings accounts were funded, we moved most of the money over to investment accounts so that the money could start to work for my kids.”
As kids grow, they should become part of the money conversation and feel the security of knowing they are slowly building a financial foundation for their future. “My children’s great grandparents often generously send $100 to mark their birthdays,” says Nikki. “I always have them allocate $25 to Spend, $25 to Save, $25 to Give and $25 to Invest through EarlyBird. Not only has the money started to add up over time, but this exercise has also taught my kids that a portion of all ‘money in’ should always be put away for the future.”
2. Plan for their educational future
In 18 years, college will cost nearly half a million dollars per child. Yes, you read that number right. The solution to tackling this staggering sum is to start small and start early. By opening up an educational fund, parents utilize tax-advantaged investment accounts to fund their child’s future. A popular option is a 529 plan, which helps parents pay for K-12, college and post-graduate education. Parents can invest money that will grow tax free through a diversified, passively managed portfolio. Importantly, any leftover money can be transferred to another family member if no longer needed by the original beneficiary, or even be put towards student loans. Coverdell Education Savings Accounts are another alternative for parents, but there is a significantly lower cap on annual contributions, income guidelines to qualify and no real ability to allow others to contribute to your child’s educational fund.
As the cost of education continues to climb, just a little planning can help parents make important inroads towards future educational expenses. “I have a calendar reminder the first week of January every year to make a contribution to my kids’ 529 plans,” says Carissa. “It always feels good to start the new year knowing we’ve taken a small step to plan financially for their educational future.” Nikki adds, “Whether parents can invest $10 or $10,000, the benefits of compounding and tax-free growth are profound. There is simply no better way to invest in your kids than by planning for their education.”
“Whether parents can invest $10 or $10,000, the benefits of compounding and tax-free growth are profound.”
3. Open an IRA
If your child has earned income, it's never too early to think about saving for the future. Even Gerber babies need to put their model smiles to work for the future. From the moment your little starts earning, it’s time to open a traditional or Roth IRA in their name. Large financial institutions such as Charles Schwab, Fidelity, and T.D. Ameritrade allow customers to open custodial retirement accounts for minors. Both traditional and Roth IRA’s are tax-advantaged ways for kids to grow their dollars for retirement, first homes, or educational expenses. (Roth IRAs might be a preferable option, as kids invest taxed dollars and will therefore owe no income taxes when they withdraw the funds decades down the line and are presumably at a higher income bracket.) And a little goes a long way. Assuming a 7% rate of return, just $100 invested at age 18 can grow to over $3,000 by retirement. Even better, $100 invested every month could be worth over $500,000 by retirement age. “With high inflation, leaving money in a savings account actually means it’s losing value,” says Nikki. “By investing in a retirement account, the money will be growing alongside your kids.”
Whether opening an EarlyBird investment account for your kiddo, setting up a 529, or establishing an IRA, the time to start financial planning is now. Longevity and compounding are powerful factors, turning even the smallest investments into meaningful ones down the road. In just three simple steps, parents can build a financially-free future for their kids and empower them to chase their dreams. And for parents who want to get the most bang for their buck out of their financial planning, they should include their growing kids in the money conversation. By narrating the actions they are taking to ensure a solid financial foundation for their family, kids can learn money smart skills as they grow.
This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.