Many parents want to set their children up for more financial success than what they had growing up. It's a noble goal that may sound challenging, but financial TikToker Vincent Chan recently revealed a simple roadmap for making your children rich.
"It's a lot easier than you think," he explained.
You've heard of investing, traditional retirement accounts, and Roth IRAs, but Chan is talking about a different account that most people are underutilizing. Here's how you can make your children rich.
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Start A 529 Plan
A 529 Plan is one of the best tax-advantaged accounts for building wealth. This account does not have a maximum contribution limit, and the money grows tax-free. If you're single, you can give up to $19,000 per year for each child. However, if you are married, you can give each child up to $38,000 per year without having those contributions count toward your lifetime gift tax exemption.
You can only use 529 plan funds for educational expenses like college and school supplies. Paying for your child's education will give them a tremendous head start, but that's not the only benefit of this account.
You don't even have to wait until you have children to create one of these accounts. Individuals can create 529 plans for themselves and list their children as beneficiaries later. You can save for your child's financial future before you even get married.
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Invest The Money And Watch It Grow
You don't have to make flashy financial moves to make your children rich. Chan recommends investing the money and watching it grow instead of trying to time the stock market or use options.
Most investors just have to find a good ETF that tracks a popular benchmark like the S&P 500 or Nasdaq Composite. These ETFs are already diversified, and you can find ETFs that align with your long-term financial goals.
Your children won't be able to access the money for a while, so it's usually a good idea to take a growth-oriented approach with these accounts. They have plenty of time to ride market volatility and corrections before they can access the money.
Good Money Habits Will Make It Better
A 529 savings plan is a great resource to cultivate generational wealth, but you still have to practice good money habits to make annual contributions. Chan regularly teaches people how to establish good money habits, but it rarely involves doing anything out of the ordinary.
Chances are you know about most of the good money habits. Creating a budget, knowing your expenses, picking up a side hustle, investing your money, and pursuing career opportunities that boost your income are some of the top money habits.
Building wealth for your children now can give you more motivation to stick with long-term financial goals and develop discipline. It's easier to act upon goals when you have a purpose that is bigger than yourself, and most people discover something bigger than themselves when they become parents.
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