Episode 54: What Works Wednesday: Building Generational Wealth, Three Ways To Save For Your Child’s Future

Welcome back to another episode of "What Works Wednesday" with your host, Leland Gross. This week, we're diving into a crucial topic for many parents: saving and planning for your kids' future. Whether it's college, trade school, or just ensuring they have a solid financial foundation, the options can be overwhelming. Leland breaks down three main methods to set up savings, highlighting the pros and cons of each and touches on tax implications and the importance of maximizing your investments. Tune in for practical tips and strategies to ensure a financially secure future for your children.

Transcript:

All right, welcome back to another episode of What Works Wednesday. I'm your host, Leland Gross, and today we're going to talk about how to save and plan for your kids' future. So a huge planning opportunity for people, a big piece where people are like, I want to do this, but I don't know how to do it well, is saving for their kids' future. Whether that's college, whether that's, you know, trade school, whether that's we just want them to be set up however they want. There's a lot of different ways that you can do that.

and it can be overwhelming. There's different tax kind of landmines, whether it's a good landmine or a bad landmine. And so I want to talk about a couple of the main ways. Now, this is not an exhaustive list because that would be really dependent on the situation. But there are very specific tools you can use to save for your kids future. I'm going to be basing this off of, you know, healthy like.

developmentally typical children special needs planning is a totally different world with totally different tools at your disposal. Which maybe we'll do an episode on that next, who knows. But let's say you are a family and you're 30s, you're having kids and you're like, I want to save for their future. How do I do that? There's three main ways you can do it. The first is using just a bank account and your child's name, which is very normal. You know,

It's not a bad plan. The problem is it's really not growing. And likely what I find is very rarely are people accessing that money for their kids pre 18. You know, you might, but for the most part, you're setting this aside for their future. And if it's not growing, it's just sitting there. You put in a hundred dollars, it's going to be a hundred dollars a year from now, two years from now. So that is a way that you can do it. You can just set up a bank account. I see that all the time. And the first thing I want to,

do is say, let's get this actually growing for your kids so that we're actually maximizing the wealth you're creating for them, which leads us into a custodial investment account. So an investment account in the name of your child. Typically, you'll see this called a UTMA, a uniform transfer to minors account, or a UGMA, uniform gift to minors account. Depending on your state, they choose one. But a UTMA, UGMA, is really just a custodial investment account.

where you are the custodian, you're the adult who can manage it, but it's for your child. You can invest it however you want. And the beautiful thing is they can use it for whatever they want. So if they want to go to college, great. If they want to buy a car, great. If they want to take a year long trip to Ibiza, have a blast. They get to decide. So it's totally free as far as how they can use it. Now there's a lot of cons to this account.

So you have to really want the flexibility. The cons are when they turn 18, it's theirs. You know, you don't have any say in it. The money, every time you put money in, that money is officially no longer yours and it's officially your child's. You just get to manage it until they turn 18, at which point it becomes their account. So I had a situation the first year ever that I worked with people and their finances.

where a parent came to me and said, Hey, we've saved $150 ,000 for our daughter. She's 17. She's