Make Your Child a Millionaire

How would you like to make your child a millionaire? According to David Bach, a financial expert, by saving $21 per month, your child could have millions of dollars by the time they reach the age of sixty-five.

For example, if you save $250 per month beginning when your child is a teenager, your child will have one million dollars for retirement.  To make this previous statement true, the money you invest should have a compound interest rate of ten percent.

If you are interested in making your child a millionaire, you may want to consider investing in IRAs, tax-free gifts, and college funds. We will take a closer look into each of these three investments that will allow your child to be a millionaire. Investing in your child’s future is one of the smartest investments a parent can make.

What are IRAs?

An IRA or an Individual Retirement Account is one of the most incredible savings tools that are currently available. There are several different types of IRAs that a person can choose from.

  1. A Roth IRA- is an account that contributions can be made to with an after-tax dollars and a withdrawal from it is most often tax-free.
  2. A Traditional IRA- is an account that benefits from tax-deductible contributions.  The money invested in this type of account is taxed upon the withdrawal date.
  3. The Simple IRA- This is very similar to a 401k plan, in which the employee and employer make contributions. These types of pension plans are less costly.
  4. The SEP IRA- This is a retirement plan for a self-employed individual. This is where the IRA is established in the name of the employee, instead of the company.
  5. A Self-Directed IRA- This type of IRA enables the account holder to directly make investments that benefit the retirement plan.
An IRA is an easy way to save money for your retirement, or your child’s education, regardless of your financial situation.  The amount of interest that is earned on the account, plus the tax-deductible contributions that are made, can be entirely tax deferred until you use the funds. With an IRA, you can easily earn an extra $500 or more a year on your investment.

A tax-free gift

Parents can give their child up to $12,000 a year. Since both parents can provide this contribution, allowing a child to receive a tax-free gift of $24,000 annually. Parents can give this gift to their child or invest the money for their child’s future education and retirement.  This is a simple way to help make your child a millionaire tax-free.

College funds

A 529 QPT college fund is a type of savings plan, in which the amount grows tax-deferred.  This means that when the money is distributed for education expenses, the money is free from all federal income taxes. A college fund is an easy way to save for your child’s education. There are several tax benefits that will allow you to save even more money to cover your child’s education expenses.

A parent’s main job is to look after their child; these are three ways that you can ensure a bright future for your child or children.