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In this highlight, we discuss how to invest with a newborn and the different account options that you have available.
Next up, we’ve got a question from Joey. He says, “My wife and I are expecting our first child in July, so congrats first of all, that’s awesome. He says, ‘What is the benefit of starting a 529 plan right away for them instead of maxing out our own Roth IRAs? How do you guys think about that?'”
Alright, so what’s spicy? What’s the benefit? I would argue if we’re using “benefit” in the sense of “better than what,” what is better about it? Come on now, bro. I mean, it almost hurts me to… you gotta bring… why don’t you start this one? You start this, you do it. You go, “Well, Joey… Joey, here, lean in closer. What’s first? 5 is your Roth IRA, 8 is the kid’s 529.” There you go, moneyguy.com/resources. Okay, but you can pick it up from there.
No, so that is true, though. Yeah, when you get on LeBron, just talk about an airplane, right? When you get on an airplane, you put your mask on before you can put the mask on someone else. You have to make sure that you are stable before you can help stabilize someone else. Well, kids are no different when it comes to saving for your future financial independence. You have to make sure that you are on firm financial footing. That means following the Financial Order of Operations. If you did not get the sound effect when Brian did his little shaking, Brian, hold up for me. You make sure you’re following the Financial Order of Operations to make sure you’re doing the things that you’re supposed to be doing. And as you graduate through, as you get to step eight, then you can start prepaying for future expenses, like saving for college for junior.
So often, we as parents, we want to sacrifice ourselves for the benefit of our child. And while that sounds noble, it may not actually be what’s in their best interest. Because when your child gets to 18 or gets to college age, they’re going to be any number of opportunities and resources for them to be able to pay for school. If you cannot help them, they can go get grants and scholarships or get loans. Those solutions will be there available for them. When you get to retirement, if you’ve not saved the way that you should have, and if you cannot stop working and live on your own, then you don’t have scholarships or grants or retirement loans. Your only option is to go live with your kids, right? Or to keep working forever. So, we would argue the best thing you can do for your kids is set yourself up on solid financial footing instead of trying to set them up and you being behind, waking up one day and saying, “Oh no, what did I do?”
