15 Investments That Will Make Your Children Rich
Would you be happy with your children living the life you're living right now? If you are, that's great, amazing! You've done it right. Now, you've got to keep going. If you're not, that's okay, because we're going to work on those goals today.
The number one indicator of whether you'll be rich is if your parents are rich. Even if they're not there yet, even if they're still young, the decisions you make today are going to change your children's lives. It starts with putting in your time, money, and effort, and from there it grows. Where you start is up to you; what they do with it is up to them. But let's get right to it, shall we? Here are the 15 investments that will make your children rich.
Starting off with number one: get them a credit card as soon as they're born. Whoa, whoa, whoa, wait a second! Okay, we know this one might give you a moment of pause, right? But hear us out. When your child is born, you could set them up as an authorized user on your credit card. They won't use this credit card; in fact, you can shred it as soon as you get it. But since their name is attached to the card, when you make purchases and pay the bill off on time, you'll also be building their credit score. So, by the time they're finished with school, they've already got a great credit record.
Now, you can also imagine that you have to be incredibly careful and responsible with this option because if you don't pay those bills on time, you're going to give them a bad credit score, which is one of the most damaging financial things you could ever do to your child. Be diligent, be careful, and they'll be grateful.
Number two: open an education investment account. Educational investment accounts come with incentives like tax-free growth and often aren't taxed when you withdraw from it for educational purposes. So, they're much more lucrative than a traditional investment account. In the U.S., the 529 College savings plans offer state tax deductions or credits for contributions. In Canada, the income earned from the registered education savings plans grows tax-deferred. When your child withdraws the money, it's taxed according to their income, so they'll pay little to no tax on it. The same thing in the UK: all gains on the junior individual savings accounts are tax-free, and so are the withdrawals.
Other countries in Europe, Africa, and Asia have similar benefits for educational investments. So, for many of these accounts, your child doesn't even need to be born for you to start saving. You can open up the account in your name and then transfer it to theirs later on.
Number three: open an investment custodial account. Just like you can open up a credit card to set up your child for a good credit record, you can also open a custodial account to invest on their behalf. The education investment accounts we just spoke about are also custodial accounts, but they're limited to paying for things related to your child's education. There are other custodial accounts that handle asset management and even future retirement savings for your children, but we're not talking about those right now.
For this custodial investment account, we want to focus on a mixture of fun, education, and making money. So, what do your kids love when they're young? Think Disney, video games, the toys they like, any gadgets or technology. These are all great investments. Your kids are already ahead of the trend, so why not get them investing in them? You can use the custodial account to buy stocks and companies that align with your child's interests. Adults can't take the money for themselves and children can't take out the money until they're 18 to 21 years old, so it's protected.
As your child's hobbies and interests change when they get older, so will their investment choices. That money stays in their accounts until they're old enough to understand how valuable their education has been. It's a great way to teach your children about financial responsibility and make money for them at the same time.
Number four: invest in startups. Now, investing in startups is high risk, but it's also fun, and they have an extraordinary return in some cases. As your child gets older, it's a journey you could go on together because they'll have their finger on the pulse of the next big thing before you do. You can use websites like Cedars, AngelList, or CrowdCube to look for opportunities to invest in early-stage companies. Crowdfunding platforms often have low minimum investments ranging from $100 to $1,000, and you could spread your investments across several startups. You purchase equity in early-stage companies that have high growth potential. If you invest in the right startups, they can grow exponentially. When these companies succeed, they may go public or be acquired, giving big financial returns to early investors, and that creates wealth for you and your children as these investments mature and yield returns.
Number five: invest in collectibles. Art, rare coins, vintage cars, model train sets—maybe they start off as little hobbies or fun quirks, but when you learn that you can channel that obsession into a profit, well then, the real fun begins. The phenomena of collective behavior and subculture appeal tells us that there are niche interests and markets with strong depth of commitment, and the people in these groups are willing to spend large amounts of money not just as an investment, but because they're obsessed with it. This means you can turn it into an investment.
With an obsession, a passion, or appreciation for something, it doesn't matter what the economic climate is. Someone out there is always going to want to buy it. Cultural trends, rarity, and demand drive the value of collectibles, and that's why they're considered safe haven assets. When we say diversify your portfolio to reduce financial risk, this is what we mean.
Okay, now we can't all be collectible aficionados; we just don't have the time or, honestly, the interest. So, where do you start for this? Well, the most popular and lucrative type of collectible is the art sector. Rare pieces by well-known artists appreciate significantly over time and the art market is known for its high value transactions. You might have heard about icons like Picasso, Basquiat, and Banksy. But the idea that you could ever own a part of one of their works is just like a pipe dream, right? Except it isn't—not when you're working with the right asset management firm.
Today's video is sponsored by Masterworks because they can help you to make your children rich, and here's how: traditionally, investing in fine art has been accessible only to the really wealthy. The barrier of entry for owning high-value artwork is virtually impossible for most people. It's complex; it takes detailed analysis and a lot of capital. So, Masterworks breaks down that barrier by offering fractional shares of artwork. Their experts select works based on blue-chip artists’ historical data and market trends to make sure they buy pieces that will appreciate in value.
Now you've got access to high-end art, which appreciates over time, and your children get a valuable stable asset in their portfolio. When that art appreciates and is later sold, you make money proportional to your shareholding in that piece, and your children benefit from the capital appreciation. Masterworks has distributed back a total of over $60 million across 23 exits. Imagine having a share of that! Well, you can by signing up now. Usually, there's a wait list for this, but if you scan the QR code on screen or go to masterworks.io, expose your children to a whole different market, diversify their portfolio, and line up an appreciating asset. It's a triple win for them.
Number six: invest in property. Say you buy a one-bedroom apartment today in a growing urban area for $250,000. You give a $50,000 down payment and finance the other $200,000 through a mortgage with a 4% fixed interest rate. You pay about $955 a month. In 21 years, you hand that apartment over to your child; it's now worth about $432,000. You've just handed them a small world on a big oyster. From there, they can sell it and invest in other ways, buy a bigger property, invest in stocks, or fund their education or business ventures.
They've got an opportunity to generate passive income through renting it out. They could use it as leverage to purchase other properties with a small down payment while financing the rest themselves. You could also diversify their investment portfolio and reduce their financial risk overall, giving them financial stability. It's a tangible asset that offers them safety, security, and peace of mind, and that is the ultimate goal here, right?
Number seven: set up a trust fund. Now, we've equated trust funds with the actions of the uber wealthy, but you know it's beneficial and accessible for everyone. With a trust fund, you protect assets from creditors, lawsuits, and even divorce settlements. You dictate how and when you want your assets to be distributed to your child, so you protect them from spending everything in one go as well. You also put assets in an irrevocable trust, which may not be subject to estate taxes, and the income generated by trust assets can be taxed at your child's lower tax rate.
The income a trust fund generates can give your child a steady income stream, so there's some sort of financial stability. It's such an important financial planning tool that anyone can and should access and use, not just the ultra-wealthy.
Number eight: put $50 into a compound investment account. Now, before you pay $50 for your next takeout dinner, wait a second. You can use that money to make your child a millionaire or, at the very least, make a small contribution to teach them about the power of delayed gratification and compound interest. You start when your child is born because the power of compounding is greater the longer your investment period. You stay consistent because consistently adding to it enhances the compounding effect, and you make sure that dividends, interest, and other earnings are automatically reinvested.
Now, you've got a choice here: you can choose to go for a high-risk, high-reward account or a low-risk, low-interest account. Now, here's what could happen. Let's say you put $50 into a cryptocurrency fund. The market is volatile, so returns might be between 5% to 15%. Let's stay positive and say they're 10%. After 45 years, that's $1 million and about $88,000 per month in interest earnings. The S&P 500 index fund averages out a 7% annual return; that's a future value of $189,600 with $1,000 per month in interest earnings. $50 into a high-interest savings account with a 2% annual interest rate gets you a future value of $43,718.
As you can see, the time, contribution, and type of account all play a huge role in how much they'll have. While we'd love to be able to throw $200 a month into a crypto fund and make our children multi-millionaires, we have to consider what we can afford and what we can risk. The most important thing is that you start where you can be comfortable, stay consistent, and choose the type of account that you're most familiar with.
Number nine: invest in travel. The more interesting and engaging someone is, the more people want them to be a part of their ventures, and few things make someone more interesting than being well-traveled. They can talk about a range of food, languages, scenery, and experiences. It helps them to connect with so many people. Children who travel are often more mature, independent, and empathetic, which can make up a cornerstone of great networking skills, and their network will be their net worth. So, set them up for success. Plus, the more they travel, the more exposure they get to foreign currency and the global economy, so they'll learn quickly about investing in international markets.
Number 10: teach them about intellectual property. We need to spend more time encouraging children to create and protect intellectual property. This may sound far too analytical and calculated for a child, but getting into the habit of protecting their ideas, especially in a digital world, can lead to huge financial returns. If you come up with a clever name or logo for your business, even if that business doesn't take off, you can own the IP for that name. If the name is unique and catchy, other companies might be interested in licensing or buying that name from you. It's far more common than you think. A strong brand can also be sold to others in the industry. Some people take a portfolio approach to trademarks, registering multiple clever names or slogans in hopes that someday some of them will be valuable. It teaches them about the value of ideas and innovation in the modern economy.
Number 11: open a Roth IRA account. In the U.S., they've got something known as a Roth IRA account, which is a special retirement account where you pay taxes on money going into your account, and then all future withdrawals are tax-free. Many other countries offer retirement savings accounts with similar features, and they're ideal for you if you want to put away money for your child's future retirement. With traditional retirement accounts, you pay taxes on gains when the funds are withdrawn, but Roth accounts are funded with after-tax money, so the withdrawals are tax-free in retirement, which can save your child quite a bit. The longer the money is invested, the more it can grow due to compound interest. Starting these accounts early for your children allows more time for compounding, which increases how much they'll get when they eventually do retire.
Number 12: give them a great financial education. A proper education is one of the best investments you could ever give your child. But leaving all of their education up to the school system and trusting them with all of your child's learning is like the worst thing you could do. Because think about it—how much financial education did you get in school? We're going to hazard a guess and say you learned almost no real-world financial lessons there, right? And they're not going to learn it at school either. As a parent, it is your responsibility to make sure they're learning.
The advice you didn't get, which left you floundering around trying to figure your way around your finances, is a journey that you can save them from. Imagine how much more comfortable you would feel in the economic world if you had been exposed to how banks work, the role of government in the economy, budgeting, saving, investing, debt management, financial goals, insurance, and all the other associated things from a young age. Imagine that you had to learn those lessons the hard way by making mistakes first and then still struggled with them. But your children don't have to go through that. The nuggets of advice, the dinner table chats, sitting them down and showing them how you manage your finances, how you set goals, and how you learn to spend less will help them to avoid making costly mistakes, accumulating debt, and falling for scams. It pushes them to become financially independent adults who can make choices to secure their financial future. These are crucial steps for building and maintaining wealth. This knowledge reduces the likelihood of making costly mistakes such as accumulating unsustainable debt or falling for financial scams.
On a similar note, number 13: teach them the value of money. Teaching your children the value of money is about helping them to understand effort and reward. You show them the effort that goes into making money; you help them to understand the importance of delayed gratification and to see the differences between wants and needs. Teaching them the value of money is also about showing them the importance of giving and sharing and using money in ways that are socially responsible. Ultimately, you want to instill a philosophical and practical appreciation for money and its role in their daily life. You know you often tell us with success you want to be able to give your children the things you never had. We see all the comments every day, and it's totally normal for that to be your first instinct. But they also need to develop critical thinking and spending. No matter what socioeconomic background they come from, they can benefit from learning about the value of money. They learn the importance of working for their money, the benefits of saving, and the impact of spending wisely.
Number 14: introduce them to different career options. If you were ever lost on your career path, unsure of what you wanted to do and what was out there, think back to how your parents spoke to you about your career. Usually, they do one of two things: one, they'll pressure you to follow a path that makes them look good but doesn't really ignite a spark within you, or two, they didn't teach you about it at all, leaving you scrambling in your final years of school to figure out some kind of plan. You need to expose them to different options and paths and allow them to explore the areas that they enjoy, then support their choices so they can become the best at it. They could choose a path that suits their passions and strengths, and those who do the things they love are more likely to excel, to innovate, or to get promoted, which all leads to higher earnings.
Children don't have the same inhibitions that adults do, so they might spot ideas that you've never even thought about, but they first have to know what even exists out there. And, of course, it's a great networking opportunity for them too. The earlier they find out what they like, the earlier they can get to meet people in that industry and immerse themselves in it. They'll start getting opportunities and offers even before they've left school.
Number 15: encourage their entrepreneurial spirit. It's not all about money; it's also great to invest in your child's creativity, problem-solving skills, and independence. Encouraging their entrepreneurial skills can lead to them starting profitable, long-term businesses. With your encouragement, it becomes natural for them to identify gaps in the market and launch ventures to solve problems, which could lead to incredible wealth. Your encouragement makes them resilient and adaptable; they learn to navigate business challenges, a crucial aspect of sustaining wealth.
And that's a wrap on our list! But since you stuck with us until the end, of course, you're getting a bonus! Today's bonus is your reputation and network. Look, okay, don't be so busy making money and putting it away that you neglect your friendships and connections because your children will benefit from those too. Your professional network opens up doors to opportunities for them—they could get job offers, partnerships, and insider knowledge all because you developed strong friendships and relationships with the people in your life. You'll give them people they could lean on for support, advice, or mentorship, even when you're not around. And social capital is invaluable. From the overall happiness of having good, genuine people in your life to the experiences that come from learning from different types of people, your reputation will precede you and your children. So, make sure it's a good one!