As a parent, you want to set your child up for financial success in the future. One excellent way to do this is by helping them grow tax-free wealth. By following a few simple steps, your child can build a substantial nest egg over time. Setting up a Custodial Roth IRA for your child can lead to a sizeable tax-free fortune in the long run.
Step 1: Get the Child a Job
The first step in this wealth-building hack is to get your child a job that provides taxable income. Whether it’s scooping ice cream, caddying at a local golf course, or even employing them in your own business, it’s essential for your child to have a source of taxable earnings. This forms the foundation of their journey towards tax-free wealth.
Step 2: Open the Child a Custodial Roth IRA
Once your child has taxable income, it’s time to open a Custodial Roth IRA for them. A Custodial Roth IRA works similarly to a regular Roth IRA, with one key difference – it is specifically designed for children, and you, as the parent or guardian, must open and manage the account on their behalf.
Step 3: Fund and Invest in the Account
The power of tax-free wealth accumulation lies in the combination of consistent contributions and wise investments. If your child diligently maxes out their Custodial Roth IRA contributions every year until they turn 18, the magic of compounding can work wonders for their future wealth.
Helping your child grow tax-free wealth is a remarkable gift that can set them up for a financially secure future. By encouraging them to earn taxable income, opening a Custodial Roth IRA, and consistently funding the account, you can harness the power of compound interest to achieve impressive results. It is highly recommended that you reach out to the trust and estate attorneys here at EPGD Business Law who can help with your estate planning needs!