1:59

have multiple vacation homes

2:02

or parents who are able to not

2:04

work. But there is some

2:06

good news. Even if you weren't born

2:08

too rich parents, your kids

2:11

can be. Eh, you like what I did there? So

2:13

I think I speak for most parents or

2:15

future parents, if you are not of that age

2:18

yet, but would consider having children in

2:20

the future. We all want to give our kiddos

2:22

or future kiddos a better life than

2:24

the one we grew up with. And

2:27

I'll be so honest, I had the best,

2:29

most loving parents, but I grew

2:31

up with certain levels of scarcity just because

2:33

my parents were Chinese immigrants, they were learning

2:36

the English language, and we

2:38

didn't necessarily have a lot of the comforts

2:41

that I am now able to provide for myself

2:43

or provide for my parents. And as we all know,

2:45

a big part of ensuring that our

2:47

kiddos are put in an easier financial position

2:50

than we were is making sure that they have

2:52

the right education. I hardly

2:54

knew a thing about finances when I was

2:56

growing up because my parents didn't

2:59

have that education. And there was a huge emphasis

3:01

placed on saving and being

3:03

frugal and being really mindful with

3:06

my money. But there wasn't

3:08

so much conversation had around,

3:10

hey, like this is what mom and dad make. This

3:12

is how much we pay and rent. Or eventually, this

3:15

is how much our mortgage is

3:17

for or what we pay on a monthly basis

3:19

for housing. And knowing our wealth was not

3:21

a conversation that I had with my parents.

3:24

And thus, no surprise, I did a lot

3:26

of trial and error figuring stuff out

3:28

in my 20s. And it certainly

3:31

would have been easier had my parents really set

3:33

me up for life. But I am really glad

3:35

that I was still eventually able to get those lessons.

3:38

And I hope that since you're listening to this, you

3:40

are going to be able to get those lessons a little earlier

3:43

than I learned them. Today we're going to walk through

3:45

four ways that rich people really set

3:47

their kids up for financial success long before

3:49

their kids can walk or talk

3:52

or even understand the concept of money.

3:54

And as always, if you are enjoying this podcast,

3:57

please do me a favor and leave us a rating. So

3:59

first up. I want to talk about

4:02

credit scores. That's not super

4:04

sexy. It's not super fun. I

4:06

get it. But making sure that

4:08

your kid has good credit likely is going

4:10

to make life a lot easier for them down

4:13

the road. And a great way that you can

4:15

do this is by adding your kid as

4:17

an authorized user on your credit

4:19

card as soon as they are born or

4:22

at least once they

4:23

are entering their teen years.

4:25

So this is how this is gonna work, right? So

4:27

you have a credit card that you are

4:29

a responsible user on. This is very

4:31

important. You put your charges on

4:34

it. You pay that balance in full on

4:36

time every single month. And then

4:38

what you can do is either call or

4:40

contact the credit card company through your portal,

4:43

your app, or even just emailing and asking

4:45

them to set up an authorized user.

4:48

They will essentially issue a new credit

4:50

card that looks just like yours, except it's going to

4:52

have your kid's name on it, but you're gonna

4:54

be responsible for paying the bill. And

4:56

I know you're probably wondering like, what does

4:58

a baby need a credit card for? They don't have expenses.

5:01

Like, of course not. But what we're trying

5:03

to do here is build our kid's

5:06

call for them. So instead

5:08

of giving my kid the actual credit

5:10

card, I'm just gonna keep that card in a safe

5:12

place or I can just cut it, frankly, but

5:15

it's just important to have that card open.

5:17

I will note that certain brands

5:19

like American Express have a 13

5:22

year old minimum age requirement, I believe

5:24

Discover's is 15 years old, but

5:27

lots of other companies like Bank of America,

5:29

Capital One, Chase, don't. So

5:31

you can actually add your babies, whether

5:35

they are one day old or one year old

5:37

or 10 years old, whatever, you can add them as

5:40

authorized users to those cards. And

5:42

I cannot stress this enough, after you have

5:44

made your child an authorized

5:46

user on your credit card, what you're gonna

5:48

do is continue to just spend normally on

5:51

your card and then every single month

5:53

you're gonna make on-time payments in

5:55

full. And this is so, so key

5:57

because if you don't do that, actually

6:00

be dinging your child's credit and

6:02

they would frankly just be better off starting with

6:04

a secured card and not necessarily

6:06

having you do this. So just make sure you are

6:09

only doing this if you are committed

6:11

to paying on time and in full because

6:13

if you do that what they can essentially do is

6:16

leech onto your good credit

6:18

and that way every single time

6:20

you make an on-time payment it counts as

6:22

an on-time payment for your kid. That

6:25

way by the time they finish high school they're

6:27

going to have essentially built a credit history

6:30

of 18 years if they've had the card

6:32

since birth or you know at least let's

6:34

call it three to five years so that

6:36

they're going to have a credit score probably in the high

6:39

700s maybe 800s and that's

6:41

going to be really really awesome in terms of helping

6:43

them rent their first apartment or qualify

6:45

for a really great credit card of their own

6:48

and you know the number one thing

6:50

really working against young people's credit scores

6:52

is just time. One of the obviously the

6:54

biggest factors is paying your bills on time

6:57

but another one of the largest factors is

6:59

essentially how long have you been trustworthy

7:02

and when I graduated college and went

7:04

out into the real world and I was a young 20 something

7:07

even though I was paying my bills on time

7:09

because my credit history was really short

7:12

I didn't have an excellent credit score until

7:15

quite a few years later because they essentially

7:17

needed the time to showcase that I had been

7:19

dependable for more than just one

7:21

year or two years. By doing this

7:23

by getting your kid as an authorized user on your credit card

7:25

you're essentially just giving them a head start on that

7:28

time which is incredibly powerful

7:30

because it's not necessarily something that you can just

7:32

buy more of or do better at like

7:35

when you are an adult and you're trying to build credit you

7:37

just have to wait it out so for

7:39

your kids to be able to start early is definitely

7:41

going to be super helpful. Also quick

7:44

side tip in the vein of

7:46

credit length and credit history this

7:48

is the exact same reason why

7:51

you never ever close your oldest

7:53

credit card so when I you

7:56

know started making some real money on wall street

7:58

I had this like rinky day credit card

8:00

that really didn't provide that many rewards or points

8:03

or benefits or cash back or anything like that and so

8:05

I thought oh like now I'll have

8:07

some real money I'm gonna go and open up

8:09

a fancy credit card one of those really good travel

8:12

rewards programs where I can get lounge

8:14

access and points towards future

8:16

flights or hotel stays and I

8:19

thought I was being really responsible and prudent

8:21

while closing my oldest credit card

8:23

because I was like hey I'm not gonna use this anymore why

8:26

have this be outstanding why even have

8:28

that risk and it dropped my credit

8:30

score by I want to say 60 points

8:32

it was insane and I looked at my credit score and

8:34

I was like nothing has changed I'm still paying on time

8:37

what happened and what ended up happening was

8:39

I actually cut my own credit history short

8:42

because instead of having an eight-year-long

8:44

credit history that ended up chopping

8:46

my credit history down to just four

8:49

years and again I had to just

8:51

essentially wait it out and keep paying on time

8:53

and that really sucked so I really hope you guys

8:56

don't do that and obviously if you have

8:58

young people in your life who are fresh

9:00

out of school or starting a first job and

9:02

they're starting to think about getting a credit

9:04

card that is more tailored to their life that can

9:07

help provide them free freebies

9:09

or benefits in the future just make sure that even

9:11

if they have that first rinky dinky credit

9:13

card to keep it open just put one recurring

9:16

charge on it it doesn't have to be a ton of money what

9:18

I like to do is I'll just put my Netflix subscription

9:21

on my oldest credit card that way it never

9:23

shuts down automatically because sometimes

9:25

if you don't use the card banks will shut the card

9:27

down for you and this way it stays open

9:30

it's a small fee I have it on autopay it's

9:32

no concern of mine and that way

9:35

I get to keep my credit history long

9:37

and robust okay up next a

9:39

very hot topic how are we going

9:41

to help our kiddos pay for school especially

9:44

knowing that so many people in our

9:46

generation whether you're a Gen X or

9:49

millennial even Gen Z or if you're

9:51

thinking about having kids in the future a lot of us currently

9:53

have our own student loan debt and

9:55

we want to make sure that our kids don't necessarily

9:58

struggle with that their entire lives or if

10:00

they do have to take on debt that they don't have

10:02

to take on nearly as much because we're going to be able

10:04

to help them out a little bit. So a great option

10:07

for your kid is opening up something called

10:09

a 529 account. And rich

10:12

people love to use this as a strategy

10:14

to help their kiddos pay for school and

10:16

save for retirement in one fell swoop

10:19

long before they are even born.

10:21

So what I'm going to do is before my

10:23

kid even exists, right now I can

10:25

do this today, I can open up a 529 account.

10:28

It is specifically an investment

10:31

account used to save and invest

10:33

for educational costs. Here's

10:35

the part that most people don't get or the fun

10:38

little secret loophole is that I don't even need to

10:40

have a kid yet to start. What I can do

10:42

is open up this account and set myself

10:45

my social security number as the

10:47

beneficiary. And I can start

10:49

contributing to it now. There are

10:51

also lots of tax advantages here.

10:54

And while 529 don't necessarily

10:56

provide any sort of federal tax benefits, 35

10:59

out of 50 states do offer some

11:01

sort of state income tax deduction

11:04

or credit for contributing to this account

11:06

every single year. So I think there

11:08

is enough of a benefit there. And on top

11:10

of that, you won't have to pay federal

11:12

or state income taxes on the earnings.

11:15

So again, just a really, really efficient way

11:17

to save for the future. And

11:19

you're like, OK, but Vivian, you're the beneficiary.

11:22

This is your account. Like, how is this going

11:24

to help my kid? Once your kiddo is

11:26

adopted or born or

11:28

what have you, you can then reassign

11:31

that account to them. All you have to do is essentially

11:33

contact the plan administrator and say, hey,

11:36

I would like to change the beneficiary from myself

11:38

to my kid. Once they have identification,

11:41

you're able to assign the account to them. And

11:44

what you're able to do is whether it's

11:46

private school K through 12 or college,

11:48

you can withdraw money from the 529 to pay for

11:51

the loan. And for these expenses

11:53

tax free. I believe there

11:55

is a limit for private schooling

11:58

during their childhood. withdrawal

12:00

every single year of $10,000. That

12:03

said, there is no limit on college

12:05

or trade school or higher education,

12:08

like beauty school, culinary school, anything

12:10

like that. It doesn't necessarily have to be

12:12

a very traditional four-year institution. I

12:14

think a lot of people recognize that regardless

12:17

of what type of job you want, these

12:19

days you will require some sort of higher

12:22

ed. So having those trade programs

12:24

or just even certification programs, you're

12:26

gonna be able to pay for those with this 529 account.

12:29

You put the dollars into the account, you

12:31

then choose investments in the account. And

12:34

like I mentioned, it grows tax

12:36

free. Best part, if your kid ends

12:38

up being like some sort of all-star athlete

12:41

or gets a merit scholarship because they're

12:43

a genius and they don't end up using

12:45

all of the money in this account, there has actually

12:47

been a new change in the tax code and

12:50

you can roll up to $35,000 of

12:52

what's in the 529 into a Roth

12:55

IRA for them. And by the time they retire,

12:58

roughly it'll be worth around $1.6 million

13:01

if you don't contribute another dollar. You

13:03

can play around with these numbers as well. I

13:06

use the assumption of putting in $35,000 as a lump sum,

13:11

no other contributions, 40 years

13:13

in the account and an annual return

13:15

of roughly 10%. But to me, that

13:17

sounds like cha-ching, cha-ching, bling, bling,

13:20

bling. Not only are you gonna be able to help

13:22

them pay for schooling, but you're really setting them

13:24

up in a way that very few people get a chance

13:26

to do for their kid. And this is awesome

13:28

because as I'm sure everybody listening

13:30

to this has probably assumed, education

13:33

costs are likely just going to continue to rise.

13:35

So doing this is gonna help to ensure that

13:37

not only are your dollars keeping up with inflation,

13:40

but that your future baby is not necessarily

13:43

saddled with nearly as much student debt

13:45

as our generation has been.

13:47

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14:17

savings? Time to invest in your upcoming goals

14:20

in the new year. Okay, moving

14:22

on to hot tip number three. So

14:25

we talked a little bit about retirement

14:27

in the last segment, about 529s and how you can

14:30

roll up to $35,000 into

14:33

a Roth IRA if your kid doesn't end up using all

14:35

of those dollars for expenses. But another

14:38

great option to think about is opening

14:40

up a custodial Roth IRA as

14:42

soon as your kid is born and really just starting

14:44

to set them up for retirement now. A custodial

14:47

Roth IRA is literally just a fancy

14:49

word for Roth IRA controlled

14:51

by parents or by guardians. So essentially

14:54

when, again, Vivian Jr. is born

14:56

or adopted, I'm going to open up a custodial

14:58

Roth IRA and all your

15:01

kid needs to do to be eligible

15:03

is have earned income that they're paying

15:05

taxes on, which is a little easier

15:07

if you have an older kid for things

15:09

like babysitting money or mowing lawns. But for younger

15:12

kids, oftentimes if your child is

15:14

participating in marketing materials for your company

15:17

or if they are being hired

15:19

as a contractor because you're a mommy blogger,

15:22

you can also provide them earned income

15:24

in that way. But once you've opened the account,

15:26

they have that earned income. What you can do is put that

15:28

cash into your custodial Roth IRA

15:31

and select some investments and let that

15:33

money grow. And I know you're probably wondering,

15:36

like, again, why are we planning for retirement

15:38

for a kid that's two days old? Well,

15:40

on one hand, it's super nice to obviously just get that

15:42

nest egg started. But even better, the

15:44

dollars you put into a Roth IRA, you'll be investing.

15:47

So they're going to grow your wealth, you're going to keep up with inflation.

15:50

And icing on a cake is the fact that those contributions

15:53

themselves, not the earnings, can be withdrawn

15:55

at any time. So that means your kid

15:58

could be contributing with you. you as

16:00

a youngster that money saving

16:02

for retirement, but they can decide that, hey,

16:05

I need a little bit of help for a down payment

16:07

on my first home. They can take some of those contributions

16:09

out and pay for that all while having previously

16:11

put that money to work. And if they do decide

16:13

to let that money stay in the account until they're ready

16:16

to retire, they're gonna be able to access that money, 100% tax

16:19

free, no income taxes or capital

16:21

gains on the amount that money has grown.

16:23

And it's just such a great triple threat tax

16:26

advantage. And because they're my kid,

16:28

I wanna make sure that they're gonna have the best life

16:30

possible and be able to retire in comfort.

16:32

And as we all know, retirement is again,

16:35

getting more expensive just like everything else.

16:37

And by the time that they retire, they're probably gonna need

16:39

a little bit more money than I'm gonna need in my

16:41

retirement. So I wanna get them started earlier

16:43

rather than later. Okay, and

16:45

now we are on to the final

16:48

hot tip. This is one that I get questions

16:50

about all the time, but what is a trust

16:52

fund and should I have one? So

16:54

let me just break it down like this. Rich people set up

16:56

their families with trust funds so that they can strategically

16:59

pass on generational wealth. Basically

17:02

a trust fund is just a legal entity

17:04

set up by a person called a grantor

17:07

so that they can leave assets like real estate

17:09

or investments, life insurance policies,

17:11

et cetera, to someone else, AKA

17:13

the beneficiary. As you probably noticed throughout

17:16

this episode, your kiddo is oftentimes

17:18

going to be the beneficiary of all of the

17:20

things that you have. And why trusts

17:22

work well is because you assign

17:25

a trustee, usually a law firm

17:27

or an accountant or a really close trusted

17:29

family member to enact your wishes exactly

17:32

how you want. You get to dictate

17:35

who, what, when, how, and why

17:37

people get what they get. And it's

17:40

really reassuring because if you left your $200,000

17:42

net worth on your deathbed to your kid, that

17:46

money could easily be pissed away. But

17:49

with a trust, you can dictate how much

17:51

each of your kids gets at what age,

17:54

for what purpose, while also potentially

17:56

keeping assets away from creditors

17:58

and reducing your taxes. This is obviously

18:00

boiling it down quite a bit. There's

18:03

lots of different types of trusts that I can get

18:05

into in another episode. But even

18:07

if your family is of pretty modest means,

18:10

talking to your accountant about a trust may help

18:12

keep the money you worked hard for in

18:15

your family, and it allows you to avoid

18:17

probate and the courts, so you're not spending

18:20

any time waiting for that

18:22

inheritance to get to your kid. They're going to be able to access

18:25

it pretty immediately. At the end of the day,

18:27

we all want better for our kids, and

18:29

setting them up financially is going to be a huge

18:31

benefit to their futures as well as ours,

18:34

because if we can help them get stable on their

18:36

two feet quickly and effectively and

18:39

teach them good financial habits, we're not going

18:41

to end up with a kid who relies on

18:43

us well into their adult years and into

18:45

our old age. So not only do I highly

18:47

recommend parents think strategically about their children's

18:50

financial future, but I always think it's really

18:52

important to have the money talk early and

18:54

often to make them as comfortable with the topic

18:56

as well. I do find it really strange

18:59

that we feel shy about telling

19:01

our kids how much we make or how much the house

19:03

is worth or you know how much mom

19:05

and dad spend on XYZ,

19:07

and then when they are adults and they're confused about

19:09

these things and we're like how come you don't know this? It's

19:11

like well you never taught me, so it

19:13

is really important to talk to your kids about money, and

19:15

there are now certainly great resources

19:18

online that talks about money in a really

19:20

relatable way to young children

19:22

as well as teens. I highly recommend

19:25

doing a quick Google search of resources

19:27

and then just vetting them really briefly yourself to

19:30

make sure that they are reputable, but getting

19:32

them started earlier is always better because

19:34

then time is on their side. So as

19:36

always, thank you so much for listening and I will

19:38

catch you guys next week. See you later

19:41

besties! On behalf of myself

19:43

and my advertising partners at Marshalls, we

19:45

want to thank you for listening to today's episode.

19:47

Marshalls is always on point with the latest

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it. does not mean you have to sacrifice quality

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for.

20:11

Thanks for tuning into this week's episode of Net

20:13

Worth and Chill. If you like this episode,

20:15

make sure to leave a rating and a review and subscribe

20:17

so you never miss an episode. Got a financial question

20:20

you want answered in the future? You can leave me

20:22

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20:28

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