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0 pointslinsomniac4mo ago0 comments

I've made a similar deal with my kids: Around 7 years ago I set up a "kid retirement" plan for them, where they couldn't touch the money until they were 18, but any money they put in I would match, and I'd also give them 10% APY with monthly compounding. My daughter aged out of it a couple years ago, she got something in the $100 range. Her brother still has a 18 months left, and I just recently rolled his over into the custodial account, he's got over a grand in there currently.

My daughter I just recently set up a ROTH for her and told her I'd match anything she puts into it, and stressed she should put something into it now from her savings, and then put some of her paycheck into it, anything is better than nothing. So far she's declined the free money. I'm going to set one up for my son, once he's at the point of having an income to justify it. She's very smart, but in some ways she's very stupid.

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bluGill4mo ago

That young you should be investing in a 527 education account not a ROTH retirement account. Education is a much better ROI when you are young than anything else. As you get older the value of education decreases. In generally the cross over is sometime in your early/mid 20s (Could be as young as 16 if you don't do well in school, or as old as 35 for things like medical doctor)

If you don't live in the US you will have different options, but the idea still applies

linsomniacOP4mo ago

I'm doing a 529 as well as wanting to set up the ROTH Note that you can also just take money from your other investments, deposit it into a 529, and then immediately pay yourself back for educational expenses you've paid for off the 529.

My kids have some 529 buffer, and we are paying for my daughter's school right now (though she's paid us back for the class she got an F in). My son, it's not clear that the typical school track is going to be the right thing for him, but we also have a 529 for him that I've been contributing to.

kevstev4mo ago

You mean a 529 account right? 527 seems to be associated with political contributions. I looked it up to ensure I wasn't missing out on something I did not know about...

bluGill4mo ago

Too late to edit, but I stand corrected

EvanAnderson4mo ago

The spiraling price of college in the US today has been questioning the assumption that education has a better ROI.

bluGill4mo ago

There are a lot of it depends. If you are going to be a retail worker all your life there is no reason to go to college. A music degree has questionable value on its own, but many people get them understanding that "any degree" is needed for some good jobs and those that find those do well enough (your generals and non-major electives are important). The school matters - Harvard is expensive but the networking can be worth it if you network well in school. State schools tend to be a lot cheaper than private or out of state as well, and generally pretty good. Scholarships enter in as well. Degrees like Engineering or Medical doctor tend to have a much better ROI long term, but only if you pick the right one and pass.

But you need to make your own decisions. For some your best ROI is dropping out of school at 16 - but for the vast majority more school will be worth it.

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sokoloff4mo ago

I take that even a little farther. Whatever my kids make (up to the Roth limit), I give them money to put into a Roth IRA [and they can keep what they earned].

That maximizes what they (as teenagers) can put into retirement accounts, their tax rate is 0% now, and though it doesn't teach them the deferred gratification aspect, it gets their retirement savings started.

We can talk about the deferred gratification aspect in other ways and/or later, but I'd rather they get 40-60 years of tax-free growth.

pfannkuchen4mo ago

Is your daughter feasibly going to make “real money” in the future? I personally look back on working a job in college as a waste of time and attempting to save money then as a waste of effort. Should have just taken more debt, the amount I did take turned out to be trivial to pay off and double or triple wouldn’t have been that bad. I feel like there are two worlds employment wise, and some advice leaks between them which ends up being maladaptive in its new environment.

sebastiennight4mo ago

I hope that @roberdam reads this and implements those into his PWA.

OP, enabling: - deposits (and withdrawals) - a matching logic (which we can do manually I guess, by doubling the deposit amount) - and correct calculation of compounding (if I had $100 for 11 months and add $100 in december, I shouldn't see the value compound $200 for the whole year)

would be great.

Bonus points if there was some kind of password (even hardcoded) so that the kids can't just click the gear icon and write themselves a blank check of $1,000,000

roberdam4mo ago

Excellent suggestions! For now, what I do is update the amount every time there's a deposit or withdrawal, and I set the initial date to the day of the withdrawal or deposit.

coldpie4mo ago

Ah, she's barely out of her teens, give her a break :) Better things to spend one's life on in those years than worrying over a few hundred bucks in a bank account. She'll come back around in a few years.

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bluGill4mo ago

If you don't live in the US you will have different options, but the idea still applies

linsomniacOP4mo ago

kevstev4mo ago

You mean a 529 account right? 527 seems to be associated with political contributions. I looked it up to ensure I wasn't missing out on something I did not know about...

bluGill4mo ago

Too late to edit, but I stand corrected

EvanAnderson4mo ago

The spiraling price of college in the US today has been questioning the assumption that education has a better ROI.

bluGill4mo ago

But you need to make your own decisions. For some your best ROI is dropping out of school at 16 - but for the vast majority more school will be worth it.

1 more reply

sokoloff4mo ago

I take that even a little farther. Whatever my kids make (up to the Roth limit), I give them money to put into a Roth IRA [and they can keep what they earned].

We can talk about the deferred gratification aspect in other ways and/or later, but I'd rather they get 40-60 years of tax-free growth.

pfannkuchen4mo ago

sebastiennight4mo ago

I hope that @roberdam reads this and implements those into his PWA.

would be great.

Bonus points if there was some kind of password (even hardcoded) so that the kids can't just click the gear icon and write themselves a blank check of $1,000,000

roberdam4mo ago

Excellent suggestions! For now, what I do is update the amount every time there's a deposit or withdrawal, and I set the initial date to the day of the withdrawal or deposit.

coldpie4mo ago

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