The Gift of Potential
This is not another college savings article on what a 529 is and why you need one for your child. This is about a busy mom of four who wants to help you give your kids the gift of passive income skills.
Like my fellow Americans, I have a lot going on. Amplified by single parenting is the effort it takes to raise four kids in an inflammatory environment and the desire to set them up for success, so you are not alone in this brand of chaos.
Institutions are trying their best to make investment account setup simple and understandable but there are still points in the setup that can feel tricky. It’s like holding a menu written in a foreign language, at a fabulous restaurant: you’re sure they won’t serve you anything that will hurt you, but you’re not sure what you’re getting, some of the words look familiar but now you have questions.
I let my 7-year-old set up her own 529 plan online. This doubled the time from 3 minutes it would have taken me, to 7 minutes of exposing her to words, engaging her in dreaming, encouraging a love for education, and allowing her to build confidence around money. Like her siblings before her, I walked her through the online form after asking her what she wanted to be when she grew up. For reference, the year before last she told me she no longer wanted to be a flamingo when she grew up. When I asked her why the change and what did she like about flamingos she answered, “Flamingos are really good at standing on one leg, but I can already do that.” This girl knows how to level up. She filled in my information, exposing her to words like “occupation” and “social security number.” Then it asked for her information. She was so excited realizing she knew where to find her social security number in the password manager. When it got to the investment portfolio strategy and fund options, I had to read the room for her energy and attention levels. I spent 5 seconds sharing that an index fund buys a little bit of lots of things and then moved on. We finished her account setup by building her “gift page” where she got to write about what she is excited about learning in college and what she wants to be. This whole process took us 7 minutes, including her linking our bank account and setting up recurring deposits.
This had zero mission of teaching her about a 529 plan and was more about the unique timing of keeping her talking about things she cared about and showing her that she has the power to make it happen. She is living (rather than learning) that money skills float around everything we want and need.
What if my kids do not attend university? No problem, there are simple ways to get the money out of the 529, meanwhile, we will have benefitted from the investment’s growth.
Want to do what my kids did? We used Fidelity, chose age-based portfolio, then clicked “index funds” and set up small monthly deposits. Then we called our grandparents for a cheering squad. That’s it!
Note: After she left my computer, I set up beneficiaries so that in the event of my death the money would not have to go through probate.
There was a time when I thought I was barely able to pay my bills living paycheck to paycheck, and have had the thought that I could not afford to put money in investments. Then I got to ask myself: Do you ever eat out? Do you ever get a $5 coffee? Do you have a subscription? Then you are privileged. I could quickly see that $5 a week into an investment would go further for me than the positive vibes from having someone else make my triple-shot americano coffee. I still talk to myself this way. That’s why, for me, setting up recurring deposits is key because:
I can always adjust my spending
I know it is easier to forget subscription models than to remember to manually send in big deposits
Dollar-cost averaging (so I don’t have to “time” the market to buy low)
Compounding growth (growth on top of every dollar deposited and growth on the growth)
If you were exploring getting a 529 plan for your kid (or even a normal investment/custodial or 401k account for yourself), I hope this made it feel a little less daunting and even doable. Remember that big money always starts with small money. Can you set one up before this month ends? I’d love to know.
Check out my children’s bedtime storybook that lays the foundation for money skills and self-worth, The Monster Job, at themonsterjob.com.
Originally published on Fortunaire.
