Practical Money: How To Make Your Kids Rich
Setting kids up for wealth without raising entitled brats
Introduction
When I started this newsletter, the idea was simple: document the financial strategies I’ve learned over the years so my kids could one day read them, absorb the wisdom, and become financially successful adults. The joke’s on me; it’s been three years, and they still haven’t subscribed. If I turned these newsletters into 7-second TikToks with a filter that makes me look 25, maybe we’d be having a different conversation.
In this newsletter, I discuss different strategies we’ve used to (hopefully) get our kids on the path to financial independence. This isn’t about turning your kids into tiny hedge fund managers or ensuring they ask for Roth conversions instead of Roblox gift cards (although that would be ideal). It’s about building habits, skills, and momentum early, which is where real wealth comes from. Not from one lucky stock pick or crypto moonshot, but from boring, consistent decisions that compound over time. By starting now, you allow the mechanics of compounding to do the heavy lifting long before they enter the workforce.
A quick reminder, because the lawyers told me to: this is not financial advice. I am not a fiduciary, a CPA, or even particularly good at assembling IKEA furniture. This is just me sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different—some of you want a yacht, others just want to stop looking at your 401(k) statements. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not a substitute for advice from a qualified professional who actually knows your situation and charges by the hour.
Also, if you find this newsletter helpful, please share it with one friend who might find it useful by using the button below.
Start a 529 Plan Early
A 529 is a tax-advantaged savings account specifically designed for education expenses. You make contributions, invest the money, and it grows tax-free. When it comes time to pay for qualified education expenses - tuition, room and board, books, or even K–12 up to $20,000 a year - the withdrawals come out completely tax-free. It can also fund trade schools, which is great news if your kid decides they’d rather be a highly paid electrician than a debt-ridden philosophy major. Many states also offer a deduction on contributions.
We started a 529 for our daughters right after they were born with Colorado’s “CollegeInvest Direct Portfolio College Savings Plan”. Something I didn’t realize at the time is that you don’t even have to wait for a child to be born; you can open an account in your own name or as a parent-to-be, and transfer the beneficiary to your child’s Social Security number later.
Plans vary from state to state, but most plans have different investment options, from “basically a savings account” to “hold on and don’t check this daily.” I basically put both of my kids’ investments completely into the “Stock Index Portfolio” our plan provides, which basically acts like an S&P 500 index fund. Once they hit 9th grade, I transferred all of the funds into the ”Aggressive Age-Based Option,” which dialled it back to 37.5% stocks and the rest in bonds.
The real magic is time. A $200/month contribution from birth to 18 at a 7% average return yields over $88,000, which is enough to cover a significant chunk of college, or approximately three textbooks and a parking pass. And if your child gets a scholarship or decides college is a scam? No panic. Up to $35,000 of unused funds can be rolled into a Roth IRA for them, subject to certain rules.
Here’s a tip for grandparents, too: If they want to reduce their taxable estate instead of buying more porcelain figurines, they can use "superfunding." One person can front-load up to $95,000 at once (the 2026 limit) using 5-year gift tax averaging.
529 Plans are offered by almost every state except for Wyoming, which has apparently decided its residents are on their own. Many states offer tax deductions or credits for contributions. You can get more details about your state’s 529 Plan at CollegeSavings.org.
Open a Custodial Roth IRA (Yes, Even for Teenagers)
Here’s the move most parents never make because they’re too busy arguing about screen time. If your kid has earned income (babysitting, lifeguarding, part-time job), you’ve got a golden opportunity with opening a custodial Roth IRA, because nothing says “I love you” like forcing retirement planning on a teenager. A custodial Roth IRA lets them:
Contribute up to their earned income (max limits apply)
Grow money tax-free
Withdraw contributions anytime (earnings stay invested)
Contributions cannot exceed your child's earned income for the year. A 14-year-old who earns $2,000 mowing lawns can contribute up to $2,000. I know asking a teenager to willingly hand over their hard-earned cash to a retirement account they can’t touch until they are grey and wrinkled isn’t ideal, so you can even gift them the contribution amount, which is what we do.
We opened our Custodial IRA accounts for our daughters with Fidelity, all the major brokers provide them. Since our daughters don’t make a ton from their jobs assisting at their dance studio and already invest monthly, we contribute their earned income for the year and put it all into two ETFS: QQQ (which tracks the Nasdaq-100 Index) and VOO (which tracks the S&P 500).
A 50/50 portfolio of QQQ and VOO would have returned an estimated annualized return of approximately 10% over the past 25 years. If that performance were to continue, and $1,000/year in contributions were made from age 16 and stopped at 20, that’s $5000 of total contributions. At 10% annual growth, those 5 years of contributions could grow to around $70,000 by the time they turn 45, and to over $489,000 by age 65. Without adding another dollar. Ever. That’s half a million dollars from five years of teenage effort and some parental nudging. Meanwhile, most adults are still trying to figure out their Netflix password.
If you’re interested in Custodial IRA accounts, Nerdwallet has an article looking at the Best Custodial Accounts here.
Add Them as an Authorized User on Your Credit Card
Before I go any further, this is ONLY for people with good credit card habits who pay off their balance every month. If your strategy for debt is “we’ll deal with it later,” then you can ruin your child’s credit before they even get a chance to ruin it themselves.
Credit history is one of the most underrated financial assets. Your child can start building it before they're old enough to have their own card. You can simply add them as an authorized user on your credit card, which means your account's payment history, credit limit, and age get reported to their credit file, even if they never use the card. This is something that I didn’t know was an option until about seven years ago, which means I wasted years not doing it and I’m still a little annoyed about it.
An 18-year-old with 5 years of authorized user history can enter adulthood with a credit score in the 700s. That means better apartment approvals, lower car insurance rates, and access to the best mortgage rates when they're ready to buy a home, potentially saving them tens of thousands of dollars over a lifetime. All because you added their name to a form once.
It’s best to use a card with a long history and a perfect payment record. You don’t need to give them physical access to the card; the reporting benefit happens regardless.
We first added our daughters as authorized users on our Fidelity Visa card, and shredded their cards once we got them. Now that they are teenagers, we use the Robinhood Gold Card, and got them their own cards which they can use for gas, approved purchases, or emergencies. The great thing with the Robinhood Gold Card is that we can keep track of their spending in their app, and also adjust the credit limit for each card, which is either great parenting or mild surveillance.
Get Them Investing Early (Even If It’s Small)
In my opinion, the best way to teach kids is through direct participation. A youth account with companies like Fidelity (teens) or Greenlight, or a standard custodial account at Schwab or Vanguard, makes this easy. I focused on broad index funds (like a total market or S&P 500 fund) as the core, then added individual stocks as a teaching tool. Teach them to reinvest dividends and resist panic-selling.
One of my earliest newsletters was about how I got my teenager investing at 13. Since then, my youngest daughter also turned 13, and I used the same strategy.
As soon as they turned 13, we opened a Fidelity Youth Account for them. It’s a great account that has no fees, includes a debit card for the child (that earns 5¢ back per use), and allows kids to invest in stocks and mutual funds.
When we opened the account, we agreed to pay them $100 / month. Of that, they keep $50, and have to invest the other $50 into the Fidelity S&P 500 index fund (FXAIX). I wouldn’t allow them to set up automatic investments because I want them to actually go in, select the ticker, and make the investment. Because if they can learn TikTok editing, they can learn how to type in a ticker symbol. They have a calendar reminder each month about making the investment, and they haven’t missed a month yet. There have also been months when they contributed more than $50, which I'm choosing to take as evidence that parenting occasionally works.
How has it turned out? Here’s the report card so far:
Oldest daughter (17): Has contributed $2,625 over 4 years. Current value: $3,752, a 43% gain.
Youngest daughter (15): Has contributed $1,880 over 2 years. Current value: $2,375, a 26% gain.
Those numbers aren't life-changing… yet. Seeing those gains shows them the power of compounding and has done more for their financial literacy than any textbook ever could. More important than returns is behavior. Patience and long-term thinking, it turns out, are easier to teach when there's actual money on the line.
Bonus Lesson: Individual Stocks as Educational Tools
Another thing we did back in 2021 was open a Fidelity UTMA custodial brokerage account for each of them, which lets you invest on your child’s behalf with no contribution limits.
I gave them the option of buying stock in companies they recognized like tech giants, entertainment hubs, snack brands, etc. My oldest daughter picked Netflix, which was a great pick even though it’s had a rocky ride this past year. That investment has grown 125%. My youngest daughter picked Disney, which didn’t do so well. After a couple of years, we sold that stock and then bought QQQM (Invesco NASDAQ 100 ETF), which is up 61%.
Even though the Disney stock didn’t work out, it taught a lesson: Not every investment pick is going to be a winner, but failure isn't a lifetime sentence. You pivot, you reallocate, and above all, just stay invested.
Conclusion
You don’t need to be ultra-wealthy to raise financially successful kids, and none of this is about creating spoiled mini-millionaires overnight. It’s about creating a series of small, intentional advantages that accumulate over decades. By doing this, you give them time in the market, financial literacy, and a massive head start while everyone else is still tying their shoes at the starting line.
Your future grandkids will probably thank you, too. Your current kids might not… at least not until they're in their 30s and finally understand what you were doing. But by then, their accounts will have had 20 more years to grow, and maybe, maybe, they'll finally subscribe to this newsletter.
That's it for this week! As always, no financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert. If you haven’t already, please subscribe to this newsletter below and never miss an update: