By Vincent Barbera, CFP®, MSFS
I’m a big fan of saving for your children’s college education. I think college is incredibly important, and to make it possible for them to graduate without the burden of student debt gives them an amazing advantage among their peers.
But is that all you can do? Aren’t there any other ways that you can invest in their future? The answer is a resounding YES. Here are some other ways to invest in your children’s future, beyond just saving for college:
Read with your children. Teach them to read. Teach them to love reading. Our U.S. college education system is based on reading—reading large, expensive, boring textbooks. If your children are competent and capable readers, they will have an advantage in the classroom, especially once they get into college.
Reading is important in college, but it is even more important outside of college. In fact, if you can read, and teach yourself through reading, then you may not even need college. We are living in the information age. Any knowledge you could possibly ever want is out there, freely available to you. Strong reading skills and a love of reading will allow your children to self-educate outside of the classroom, and there will be no limit to what they can learn.
Reading is a small investment that will have big results. Invest some money into buying books or hiring a tutor. Invest your time into reading with your children. Reading will open amazing doors for them both now and in the future.
Travel is another way to prepare your children for the future, though the benefits are more internal than external. Sure, they will learn to navigate unknown places, talk to TSA agents, and sleep in cramped spaces. It’s good for them to be pushed outside of their comfort zones and try new things. But what goes on in their heads and hearts is where the real value of travel lies.
When you give your children the opportunity to travel, you open their eyes to new ways of seeing and doing things. Experiencing different cultures shows them that there isn’t just one way of living and their way may not always be the best way. There are other ways of living and perspectives in this world and you can’t always assume that others think the same way that you do.
It is especially powerful to take your children to third-world countries, or even just areas of our own country that are poorer than they are. When you grow up with all your needs met, it’s easy to take things for granted. Being exposed to poverty and lack will help your children appreciate everything they have, from possessions to opportunities, and make them more grateful.
Travel is fun, builds character, and can make your children more empathetic and well-rounded. It’s a great way to invest in your children and their future selves.
Make Them Work
The best way to avoid having the lazy, entitled adult children that are so commonly stereotyped these days is to make your kids work. Don’t just make them work, though, teach them how to work. Teach them to do chores with excellence and in a timely manner. Teach them the joy and satisfaction of a job well done.
While it is important for them to do their schoolwork, that is not the kind of work I’m talking about. I’m talking about manual labor. For small children, it could be dusting or putting away clean dishes; for older children, folding their own laundry or raking leaves; for teenagers, mowing the lawn or getting a part-time job. A strong work ethic is vital to success, no matter where your kids end up in life. And if you want them to go to college, having them do manual labor may be a good motivator.
Help Them Build A Business
Teaching your children to work is vital to their future success. Although, if you have a young entrepreneur on your hands, teaching them to work for themselves could be priceless. Learning to talk to customers, perform work as promised, calculate gross and net revenues, and understand common business principles will be invaluable for their future endeavors.
So, if your child is interested in entrepreneurship, or you’re able to convince them to give it a try, be their first investor. Buy a lawnmower so your daughter can start her own yard care business. Buy a pressure washer so your son can go beautify the neighborhood for a fee. Pay for the CPR certification class for your budding childcare worker. But don’t just give them the tools they need; teach them how to use them effectively.
Open An IRA For Them
Finally, if your child is working outside of the home, whether for an employer or for themselves, open an IRA for them. Anyone with earned income is eligible to contribute to an IRA, regardless of their age. The 2019 contribution limit is the lesser of $6,000 or 100% of earned income. A Roth IRA is a smart option because your child will likely have too low of an income to owe any taxes. Also, the growth is tax-free and your child will have a lot of time to let it grow.
Let’s say your 15-year-old earns $2,000 mowing lawns over the summer. You can open a custodial IRA for her and contribute $2,000 of your own money into it. She will have at least 50 years to let it grow before needing it for retirement. At an 8% rate of return, that $2,000 will grow to be $93,802. Now imagine the results if you did that every year.
How I Can Help
There are many ways to invest in your children’s future beyond just saving for college. The ones I’ve mentioned are just some of the many. At Newbridge Wealth Management, we believe finances are a family affair and it’s never too soon to start preparing the next generation.
If you have a young entrepreneur, we would love to meet with them, discuss business, and help them set up their first IRA. Or if you still need to start investing for their college education, we can help with that as well. Click here to access our online calendar and easily schedule a free 15-minute introductory phone call, or you can email us at firstname.lastname@example.org or call 610.727.3960 to schedule a meeting today!
Vincent R. Barbera, CFP®, MSFS is a managing partner and co-founder of Newbridge Wealth Management, a private financial counseling firm located in Berwyn, Pennsylvania. Believing in a patient, disciplined approach to investment management that delivers value and peace of mind, he utilizes a process-driven approach to financial planning that provides comfort and clarity to his clients’ long-term goals. Along with a bachelor’s degree in psychology and business, he has a master’s degree in business and financial planning and Certified Financial Planner™ designation. Learn more by connecting with Vincent on LinkedIn, or send him questions at email@example.com.