[0:00]Hey besties, I've got some good news and I've got some bad news. Bad news, the number one indicator of whether or not you'll be rich is whether your parents were.
[0:10]And I don't know about you, but I wasn't born to Uber rich parents.
[0:14]Sure, must be nice to have generational wealth and never have to worry about money or working ever.
[0:20]But that isn't reality for most of us. Here's the good news. Even if you weren't born to rich parents, your kids can be.
[0:28]I think I speak for most parents or future parents when I say, we all want to give our kiddo a better life than the one we grew up with.
[0:35]A big part of that is ensuring that they are put in an easier financial position than we were.
[0:40]I hardly knew a thing about finances and I had to do a lot of learning and figuring out in my 20s, but it would have been easier had my parents set me up.
[0:49]Since I'm Vivian, your rich BFF and your favorite Wall Street girly, I'm going to walk you through the four ways that rich people set their kids up for financial success long before their little ones can walk, talk or even understand the concept of money.
[1:01]As always, please like, comment, and subscribe to learn more about being good with your money. Let's get to it.
[1:08]First things first, you can add your kid as an authorized user on your credit card. Rich people help their kids get perfect credit scores way before they can legally apply for credit cards themselves and it's not that complicated.
[1:19]As soon as my kid is born, I'm going to set them up as an authorized user on my credit card. This means they'll be issued a credit card with their name on it, but I'll be responsible for paying the bill.
[1:30]And you're probably wondering, what does a baby need with a credit card?
[1:34]It doesn't. What we're trying to do here is build our kids credit for them.
[1:39]Instead of giving the card to them, I'm either just going to cut it up or put it in a safe location.
[1:45]Then I will proceed to make on time payments on my credit card bill every month. This step is key.
[1:51]If you cannot pay your credit card bill on time, do not do this because you will not only not help build your child's credit score, in fact, you could ding it.
[2:00]So only do this if you're able to pay your credit card bill on time. That said, if you can do this, this will let them leech onto your good credit.
[2:10]By the time they finish high school, they'll have built a credit history of 18 full years and have a credit score in the high 700s, which will help them rent their first apartment or qualify for a great credit card of their own.
[2:23]The number one thing working against young people's credit score is time.
[2:28]Even though I was paying my bills on time because my credit history was short, I didn't have an excellent credit score until later in my 20s. By doing this though, you'll be helping your kid get a head start.
[2:40]Up next, number two, open up a 529 account for your kid. Rich people help their kids pay for school and save for retirement in one fell swoop before they're even born.
[2:50]Before my kid exists, when they're still just a glimmer in my eye, I'm going to open up a 529 account.
[2:55]It's an investment account used to save and invest for educational costs.
[2:59]You don't even need to have a kid yet to start. I can set myself as the beneficiary and then I'm going to start contributing to it now.
[3:07]There are lots of tax advantages here. While you don't get any sort of federal tax credit, 35 out of 50 states do offer state income tax deductions or credits for contributing every year.
[3:18]And I won't have to pay federal or state income taxes on the earnings in this account. Once my kiddo is adopted or born, I will then reassign the account to them.
[3:28]Whether it's private school, kindergarten through 12th grade or college, I'll be able to withdraw money from the 529 to pay for these expenses tax-free.
[3:38]Best part, if my kid ends up being an all-star athlete or gets a scholarship and doesn't use all of the money in the account, thanks to a new change in the tax code, I can roll up to $35,000 of what's in the 529 into a Roth IRA for them.
[3:54]And by the time they retire, it'll be worth $1.6 million or so depending on growth.
[4:01]Cha ching. This is awesome because these days most children will have to go to some form of higher education.
[4:08]529s not only cover college and university costs, but they can also cover trade school, culinary school, beauty school, etc.
[4:15]Furthermore, education costs are only going to continue to rise, so doing this will help ensure your future baby is not settled with student debt like our generation was.
[4:24]Three. Another great option is a custodial Roth IRA. Rich people also love helping their tots save for retirement when they're just little kids.
[4:34]When Vivian Jr. is born or adopted, I'm going to open up something called a custodial Roth IRA.
[4:39]To be eligible, all the kiddo needs to do is have earned income that they're paying taxes on.
[4:45]Easy for older kids, things like babysitting, mowing lawns, but for younger kids and really rich parents who have their own companies, they could just hire their kid as a contractor.
[4:56]For example, babies could be paid as talent. That's what your favorite mommy influencers are probably doing when they feature their kid in photos and videos.
[5:02]And you're probably wondering, what does a baby need with retirement money?
[5:06]Well, on one hand, it's nice to get the nest egg started, but even better, the dollars you put into a Roth IRA, you'll invest, so they'll grow your wealth.
[5:14]Icing on the cake, the contributions themselves, not the earnings, but the contributions can be withdrawn at any time.
[5:21]That means your kid could withdraw contribution dollars for things like their first car or home, all while having previously put that money to work.
[5:29]If they decide to let that money stay in the account until they're able and ready to retire, they'll be able to access that money 100% tax-free, no income taxes or capital gains taxes.
[5:39]And last but not least, number four. This is the one I get questions about all the time. What's a trust fund?
[5:46]Rich people set up their families with trust funds so that they can strategically pass on generational wealth. Basically, a trust fund is a legal entity set up by a person called a grantor, G R A N T O R, so that they can leave assets like real estate, investments, life insurance policies, etc. to someone else, aka the beneficiary.
[6:06]Why trusts work so well is because you assign a trustee, usually a law firm, accountant, or close family member to enact your wishes exactly how you want.
[6:17]You get to dictate who, what, when, how and why people get what they get. If you left your $200,000 net worth to your kid, that money could be easily pissed away.
[6:28]But with a trust, you can dictate how much each of your kids gets, at what age and for what purpose, while also potentially keeping assets away from creditors and reducing taxes.
[6:39]This is obviously boiling it down quite a bit, but there's lots of different types of trusts, and I can get to that in another video.
[6:46]But even if you are of modest means, talking to your accountant about a trust may help keep the money you worked hard for in your family.
[6:53]At the end of the day, we all want better for our kids, and setting them up financially will be a massive benefit to their futures, as well as yours.
[7:00]If you can help them get stable and on their two feet quickly and effectively, you won't end up with a kid who relies on you well into their adult years.
[7:08]Not only do I highly recommend parents think strategically about their children's financial future, but I also think having the money talk early and often to make them as comfortable with the topic is also key.
[7:19]As always, thanks for watching and make sure to like and subscribe for more money, finance, and investing tips. See you later, besties.
