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Yeah, yeah, we're back, Happy Thursday, Happy Thursday.
Yes, Yes, welcome back to the educational series. This is another one. I might even sure where number we're at.
I probably would throw around six, but I could be wrong.
We've covered a lot, we covered how to buy a call, we covered things to know before buying a home. We covered you know, process of buying a home, credit covered taxes, we've covered artificial intelligence, so stocks. So this is one that's always vitally important, you know, for everybody, but especially for people that have a family, have children, thinking about having children, have grandchildren, niece, nephew, god children, whoever, you know, anytime.
You want to plan for young people's future.
The term generational wealth is something that gets thrown around a lot, but what does that really mean?
Right?
It means to create wealth for generations to come. So today we're going to do the first step. We're going to teach you how to make your child a millionaire. I think we've already taught you how to make yourself a millionaire if you follow the principles. But we're going to teach you how to make your child a millionaire. And we get five steps. This is gonna be five steps. It's not the only five steps with five five steps that you can utilize in your life to achieve that goal.
Yeah, yeah, it's one of these things. And it takes me back when we were looking at the notes for the episode. It took me back to being twenty four years old, twenty five years old, sitting in your office and you actually breaking this down for me at that age and at the time I had no kids, wasn't engaged and have a wife obviously, and part of me, like a small piece of me, was like, yo, why do I need to do this? But being educated on it very quickly, I was like, oh, this makes perfect sense.
Right.
I always say my favorite line is if you plan for now for the future, right, like, think about your trajectory, right, it's that sheet line plan for the future, because you're gonna be older a lot longer than you're gonna be younger, Like, here are the strategies now while you're young. So this is like a selfless actor if you're an adult, but it's a necessary act. So hopefully you got your pens in your pass ready because it's going to be an educational.
Session, yes, sir, So before we start, definitely have to extend our condolences to EYO alumnist alumni. Absolute actually a brilliant person when it comes to the world of business and ALTHO philanthropy and just a legend junior Bridgeman. We covered his story actually at the beginning stages of early leision, somebody that was an NBA player and then you know, became a number one franchise owner for Wendy's and Chili's in the world, and then purchased a Coca Cola bottling
plan and became you know, a billionaire. Over the course of time, owned Ebony magazine, owned Jet magazine of other different things. So he passed away a few days ago. We had him at Investvest a few years ago. He spoke on stage with Rich Paul. Great conversation. So definitely want to extend our condolences to his family, to you know, the Louisville community, the Milwaukee community, the East Chicago community.
It was part of a few different communities, but all the lives that he's impacted, and hopefully, you know, people can learn even more about his story now that he's passed away and use it for education and information and motivation inspiration. So you know, to honor to be able to have him shared a stage with him, ask some questions somebody that we we you know, we highlighted early,
so that was a full circle moment. So definitely before we started the show, wanted to extend our condolences to Junior Bridgeman's family and friends.
Opportunity to actually meet his family.
Beautiful family, beautiful man, and I'm happy we got to give him as flowers at the time that you know, when we were covering the early stories, when it was just you and me, uh, and people were like, oh, we didn't understand who he was. People started to get familiar with him, and then obviously at Investmvest, our community for sure got a definite feeling of what he's done inside of business, but who he is as a man.
And even you know, up into his untimely passing, he was still giving back, right, he was still doing philanthropy, was actually at an event. So it's untimely, it's it's a tragedy. But I'm glad we got to give him as flowers. And hopefully, like you said, people will now look into his business acumen and the legacy that he's left and hopefully emulated that to a certain extent. So againdosis to the family, and I thought, some prayers are with you.
Okay, So now let's get into it. Okay, First, you know, why is it important to do this right? Well, I think the number one thing is it all comes down to math, and there's a thing called compound and interest, and I think Warren Buffet at the compound and just one of the windows of the world. And you know, the earlier you start to invest, the better chance you have of achieving wealth. That's just as easy to explain
as possible. If you start to invest at ten, you will achieve wealth quicker than somebody that invests at forty. If you invest at twenty, you'll achieve wealth quicker than somebody that invests in fifty. So the good thing with children is that they have time on their hands, right, So as a parent, even small amounts of relatively small
amounts of money can lead to huge nest eggs. We'll talk about some examples, but that's the probably the biggest thing as far as why it's important to start thinking about how you invest for your child and set your child up is because time is on the side of the child, so you want to take advantage of that.
Another thing is the preparation aspect of generational wealth. As we said before, if that's the goal, then the earlier that you prepare, the easier it is for you, because the less money that you actually have to put out that goals in the other way. So one way for the compounding interest is that you start early and you
have a lot of money later. The other side of that coin is that the earlier you start, the less money you actually have to put away to have that million dollars or the two million dollars or whatever you want. So it all comes down in time. It comes down to being a good steward and just really the responsibility of any any parent, I think is to not only better their life, but better that their children's lives for sure, and then even their children's children's right, you really want
to create legacy for yourself. So these are things that you can actually, you know, start today, and you don't have to be a millionaire to start. We're going to talk about different strategies where you can start with minimal amount of money but still achieve that long term goal.
Yeah, and I think it's important right on top of the savings part from obviously from the adult to the child. But it's the educational process and there's no age to it, right, Like we always talk about financial education in the sense like, oh when should I start?
Where should I start?
We should start now and the educational process is great if parents don't know, because this is a great place for you to know, but it's also a great place for you to learn with your children.
And so we're talking about investing.
What does that look like when you're getting a brokerasure account, right, you're learning that, but you're teaching your child at the same age and at a certain point when your child has those lessons at ten, eleven, twelve, by the time the eighteen and be able to own their own brokerasure account and have their own investment accounts with a brokerage, they're familiar with it. And that familiarity only can breed
success in the future. And so yes, from a financial standpoint, but also from the mindset standpoint of this is not something that is foreign to me. And we see that in a lot of communities and we're starting to see a shifting ars, but we need to see it more.
So, Yeah, let's get let's get to it.
Let's get it going.
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Time, Okay. So let's start with the first and easiest way.
To make sure your child is a millionaire. And by the way, this is a millionaire, not like necessarily tomorrow, but at some point in their life they will be a million.
I think we got to get out of that mindset, right, like success takes time, wealth takes time. Generational wealth obviously takes time, but you have to start somewhere, but it's not going to happen tomorrow. I think people get that exception, like we're so used to saying all right, let's get rich quick. No, let's get wealthy and stay wealthy, funds saying amount of time.
So the first, the first thing and the easiest pathway is life insurance. Think that that's something that everybody should have, whether you're a parent or not, but definitely every parent should have for sure. So by now you probably heard life insurance. So I don't think you need to actually have an explanation of what life insurance is. Right, it's pretty self explaratory. It's insurance on your life. And everybody's going to pass away at some point. So when you
do pass away, your beneficiaries will get money when you die. Right, you buy a policy, you pay a premium, your beneficiaries get money when you die. That's pretty self explanatory, pretty easy to understand. But there are some things that you need to know about life insurance. So there's different types of life insurance. This is important, Okay, So we're going to talk about three types of insurance, term insurance, universal
life insurance, and whole life insurance. They all have different mind you, this is a video that we're going to cover five different topics, so it's not just an insurance video. So we're not going to go for forty minutes into insurance, even though we could. But we have other videos on our YouTube channel about insurance. But this is just the
overview to kind of get you on track. So, okay, insurance is vitally important obviously when you're creating generational wealth, because that is a guarantee that your family or your child, whoever you provide beneficiary for will get upon your death right. So term insurance is the easy way to go about it. As far as premium is concerned, right, it's the lowest premium.
It lasts a turn. So if you have a twenty year term policy for a million dollars and you're thirty five years old, and that might be thirty dollars a month, right, if you're healthy, that might be thirty dollars a month.
So you.
The benefit of that is that you're able to get a larger policy for a low premium. Right, because a lot of times. What stoles people from getting large policies is the premium, So that's the benefit. Now you might say, okay, well, why do I need a million dollar life insurance policy if I make one hundred thousand dollars a year?
That was really my question.
So yeah, rule of.
Thumb is that you should get at least ten times your salary, some say twenty because let's think about this rationally. If you make one hundred thousand dollars a year, right after taxes, that's probably around seventy So most people income usually increases over the course of time, but let's say it doesn't. Let's say it just stays at seventy thousand.
So now if you have one hundred thousand dollar policy, then your seventy thousand dollars contribution to your family will be done in a year and three months, right, and they still have to live for another eighteen years.
Of if you have a baby, or ten years if you have a tenure.
Right, So you want to make sure that your income is provided for at least ten years. So if you have a million dollar policy and you make ten one hundred thousand dollars a year, then that million dollar policy now invested into the stock market, you could probably pull around five percent safely seven percent if you want to be a little bit more aggressive. But now you can you can really pull almost almost close to the amount of money that you made as yearly, right from just
the growth from the stock market. So that's how you come up with that number. You want to have a larger number death benefit as opposed to just the amount of money that you actually are making per year.
And this is one of those I mean literally, that was a conversation that we had we sat at the table.
I'm not even thinking of it in terms.
I think most people in that age that that twenty three to twenty four to twenty five, they're thinking, like why should I be thinking about when I'm going to die?
Right?
And it's one of those things that I remember the answer you gave me. You're like, well, everybody's going to die, so you should start thinking about it.
And I was like that was harsh.
But yeah, you were right, right, Like I don't have a family now, right, I don't have any responsibilities other than myself.
This is the perfect time.
Number One, I was in the best shape of my life, which is important. I'm sure youre going to talk about that. Right, I was healthy, I didn't smoke, I didn't drink. All these things are positive for people who are trying to give me policies. And when I realized it, right, that million dollar number sounds like a lot, but the way it was, like, Yo, if you do a term like
it could be low cost. It could cost you twenty nine or thirty nine or forty nine dollars a month, which I don't think most people understand.
Right.
They think, if it's a million dollars, I can't afford to have a million dollar policy, But when you break it down, it's like, wait, twenty nine dollars among that's my phone bill is triple that, right, Like these are the things that that mindset and the education that we don't have and we kind of miss.
And this is how sometimes wealth is passed without us even know.
Or they think that they don't need a million dollar policy. Right, It's like I'm not that much. And this is a common misconception as far as like to say, like I don't need that much or I don't want to leave too much money. You can't be over insured, So there are guidelines and how much insurance that you can actually get.
So if you make fifty thousand dollars a year, you cannot get one hundred million dollar life insurance policy, right, you can't get a fifty million dollar life insurance policy.
So being at this guidelines.
That lets you that lets you know that you should get to the max of what's allowable because there is no such thing as being over and shurt or having too much insurance. The insurance company is not even going to ensure you for things that don't make sense financially, Like if you make fifty thousand dollars a year, you you don't need a hundred million dollars policy. So that lets you know that they in their mind already has a number of what you actually need for your family.
That's a great point, So you're not you shouldn't go against something that's already set for you as far as the insurance company, like, don't under insure yourself.
And that's a great point.
The other part of it is as you start to accumulate more money, then that should change. Right, So like if I started out making sixty thousand, then I made one hundred. Now by the time I'm finished teaching, I'm making one hundred and fifty. Yeah, that needs to multiply by ten. So my policy probably needs to be updated to a point where it now matches the money that I was making because my family is relying on that.
Yep.
So the pros and comers with term insurance. The pros or that is low costing premium. That's the biggest pro. The con The biggest knock against term insurance is that it's for a term and expire. So if you get twenty year term insurance and you're twenty five years old, it's going to expire expire when you're forty five. Now, most people that are healthy when they're twenty five are still going to be alive when you're forty five. So in that scenario, you would have paid for twenty years.
And some people will say, well I have nothing to show for it, like it's just a waste of money. But in any that that's true with any insurance. If you have a car for twenty years and you never get into a car accident, you don't look at it like while I paid car insurance for twenty years, I wasted it. No, you have to have the insurance just in case something happens, or fire insurance or flood insurance.
If you think about it, every insurance that you have.
You can't get a phone without insurance.
Yeah, the point of it is to not ever use it. So life insurance is the only thing that we look at where it's like I have to use it. Right, every other insurance, you just have the insurance and you hope that you never have to use it, and if you do have to use it is there for you. That's how That's how you should look at the life
insurance the same way. But it will expire. And now at forty five, if you want to get new insurance, you're going to be you're going to pay a higher premium because you're twenty years older, and then you might not even be able to get the insurance if you have some medical issues or you know, something like that. So that that's some level of negative that can go along with the term insurance. But the alternative de term insurance is what we call permanent insurance. That's insurance that
lasts fever. So there's two types of permanent insurance for the most part, Universal and whole life. As I said, there's different types of Universal, but we won't go to in depth because it's not a life insurance class. But you just it's important for you to know whole life insurance is the oldest when it comes to permanent insurance, it's the most conservative. It's guaranteed, how the money. So there's money that grows inside of a policy, which is
called cash value. This is important to understand because that's a double edged sword. You have a death benefit, but you as you pay a premium, portion of that premium actually, over the course of time grows into cash that you can actually borrow from. So you might have a million dollar whole life insurance policy and in twenty years you have two hundred thousand dollars of value that's grown inside
of that policy. You can borrow from that if you choose, and that's money that you can actually utilize to go for your child as well. You can pay that college tuition, or you can do anything. You can put it down payment for a house, you can start a business. You know, if you need money, then you can take money from a life insurance policy while you're still living. The whole life insurance as far as premium, is the richest, so that's going to be the highest premium on the chart, right.
But once again, it's guaranteed, So how the money grows, it's through dividends that the company play pays and through set interest rate. So over the course of time you're probably earn around five percent. If you look at it from a long term perspective, your boy to earn like five percent interest on the money as it's grown inside your account. The alternative to that is universal life insurance.
So universal life insurance is like a hybrid where it's whole life in the sense of that it lasts your whole life. But there's different ways how the money can grow. One way the money can grow it's called variable where you can invest in the stock market, and that's variable. It can go twenty five percent one year, or it can be negative eight percent one year. Another way is through an indexed account where that's usually capped in like two percent floor and then twelve percent attract the S
and P five hundred. That's the way to invest in the stock market, but you have guardrails on it. And then another way there's a hybrid to this whole thing, which is called guaranteed protection universal life. So this is good for people that say I don't want to invest money in life insurance.
But I don't want something that's going to run up.
Universal life insurance is pretty much like a lifelong term policy where it lasts your whole life, but that is not designed to build cash value. So you pay a premium, you have a death benefit. That's going to be the lowest costing permanent policy that you can have, So all of those type of policies. The good thing with term
insurance also is that you can usually convert it. So if you need a million dollars of insurance, but your budget is two hundred dollars a month that you can pay for insurance, a million dollars, a whole life might cost one thousand dollars a month. A million dollars a term might cost twenty dollars a month. So you're probably not in a position to pay one thousand dollars a month, but you could do more than twenty dollars a month.
So what you can do is a combination. You can do two hundred thousand dollars of or one hundred thousand dollars of whole life, right, let's say, and that's one hundred dollars a month, and then you do nine hundred thousand dollars of term insurance.
Right.
So now this whole package might cost you one thirty a month. Right, So the benefit with that is that you still have some money that you're actually saving. You have some portion of your portfolio, just like investing, you have a portfolio, some portion of your portfolio that's gonna last forever, but then you have another portion that over the court of time, you can transition that to the permanent.
So life insurance step one vitally important cooking, easy to do cooking, and that's a that's the easiest way to ensure that your child becomes a millionaire.
So there's a strategy here too, right, And we've seen it happen in plenty of communities, and I think we broke it down in like one of our early classes.
But insurance is important.
But yes, your family for yourself, But what about getting insurance on family members said that might be older than you, Because that might be a strategy too, when we see our elders and people as a family decide that we're going to get a plan knowing that at some point that family members going to pass, and now that can be trickled down to the beneficiaries.
Yeah, that's definitely something that's beneficial and helpful. Sometimes it could be a little difficult because you know, if you're older, you might have some medical issues and just being old period, premium is gonna be higher. That's the strategy that can be used also for adults. Okay, so now let's go to number two. You want to start with this the wroth ira.
Now this is your will basketet. I want you to cook and then I'm just gonna like chef up with you. So the wroth ira is another one of these strategies that we talk about that can be beneficial for not only for the adult, but for the child. So there's a few types. There's the roth ira uh, and then we have ah.
There's a traditional ira and the direct So traditional IRA is you put money into a retirement account and you get a tax deduction for the money that you put in, but it's taxable when you're in retirement.
So IRA stands for individual retirement account. That's what it stands for.
Right.
So people are familiar with four one K that's what your job provides, and.
The four O three B if you work in some other same thing.
Yeah, but if you want to do it for yourself as a self employed personal just a regular you know, employee, you can do an IRA and IRA is an individual retirement account. So the regular individual retirement account is what we just described, and then there's a rough the wroth IRA. You're able to put money in for your retirement, but you don't get a tax deduction. But the benefit with the rough hiray is that the money's tax free when
you take the money out. So one of the good things with being an entrepreneurs that you can employ your child. We talked about this before, yep. But even if you don't employ your child, you can set up a rough IRA for your child as long as your child is working. So this year, how much money can you pay your child?
This year?
I think we got up to fourteen thousand, three hundred fourteen thousand, three hundred, and we get this question a lot, a lot, And yes, I'm glad that people are asking the question of like can I The child has to be of working age. So if you have a two year old that is not classified as a working age, I believe the working age is between seven to seventeen,
and they have to be doing something that's functional. We work in a platform that actually has functioned, right So for my son, right when we actually record, he'll come down, he'll set up, he'll sweep, he'll clean the area. That is an actual functional duty that he is doing to help the business. So if you don't have a functional activity or a purpose for it, then it makes it tougher. But it has to be between the ages of seven
to seventeen. You can't have your three year old performing function or maybe you can' maybe you got a super child, but that's the age range.
So the benefit okay, So the benefit with paying your child is that it's a tax deduction for you as an entrepreneur for your company, and it's tax free income to your child up to that amount. So if you pay your child ten thousand dollars, right instead of giving them allowance, right Because now when you give somebody allowance, that's after tax money. You've already paid taxes on that money. So if you've given them allowance to buy sneakers or to you know, do whatever, you don't get any benefit
for that. But as an entrepreneur, if you can give them ten thousand dollars or five thousand or whatever you're giving them and it's salary, now you get a tax deduction. Right, you save money on taxes and it's fee they don't they don't have to pay taxes on that income. So
that's beneficial for any entrepreneur. Now, where the raw firay thing comes into play is that you can contribute to a raw fira or an ira, but we'll talk about the royal fira for now, which you can contribute to a row firara for your child that's working up to your amount that they're actually getting paid. So if they if they have a regular job, they work in CBS, and they got paid five thousand dollars, then they can have a raw fira up to five thousand dollars if
you pay them. If you are an entrepreneur, you pay them five thousand dollars, then they can contribute up to five thousand dollars. Right, So the limit for this year is UH seven thousand, seven thousand, that's the most right. So Okay, this has beneficial for people to know and understand because once again it's just relatively short periods of time that could lead to large moneys over the course of time. So if you are an entrepreneur, right and you have a business in mind, you you can be
an entrepreneur and still have a job. Also, but if you if you're an entrepreneur, you have a business. Let's say that you you you paid your child seven thousand dollars right for the year. Now you can that's a tax deduction. You're going to save money seven thousand dollars only taxis Now you can take that seven thousand dollars and put it into a rough IRA. Now, the benefit with that is that now the money is actually invested. You're invested in the stock market. So let's just use
an example. Usually working age is around twelve, so if we picked the ages from twelve to seventeen, to seventeen will be probably a last year in high school and then you know, after that point they're put there an adult eighteen years old.
So you go from twelve to seventeen, which is six years.
Right, Let's say that you put seven thousand dollars into a row IRA every year for a child. Mind you you're getting a tax deduction for this money. Anyway, you put seven thousand dollars away every year for six years, right, and let's say you invested it in QQQ.
Right.
Historically, over the last fifteen twenty years, I think it's average over ten percent, so we can use ten percent as something that should possibly be a realistic number.
That might and that might be conservative at this point.
So let's say you invested that money ten percent a year untouched. Because the thing with the IRA is that it's for your retirement, right, so when they retire, they'll have three point five million dollars. So the benefit with that is that you already made your child a multi millionaire in their retirement. Now to pushback for someone say okay, well the child has to wait till sixty years old
to get it. Well, my question is if somebody had a million dollars, two million, or three million dollars for you right now and said, and you're forty, and said at sixty you will you will get this money. Would you be mad and you did nothing for it a couple of years of work when you was a child. Would you be mad at your grandparent for doing that? Or would you look forward to the opportunity? Mind you, you can take money from a row fire eight early in
the net. There's some penalties that you have to pay, but you don't have to wait till your sixty.
You don't have to wait till you sixty and again this is a conservative number, right, so we're talking about ten percent. There's years obviously we saw over the past three where the QQQ was trashed, the technology sector has gone up twenty five ers.
Ernest, what's up?
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Right is going up to twenty six percent, and then it's going down to twelve. If we just take those averages over the past five years, you're talking about way more than ten percent. And the one thing that we know about the stock market is that it is going to appreciate eighty two percent of the time. The SMP has increased over the course of the market's history, and
so ten percent is a conservative number. So you're saying sixty, but that number could hit three million by fifty, right, And so it's all about deferring the gratification, right, just knowing that it's there and letting it compound, like it is the eighth wonder of the world. For a reason that money doesn't get touched, you'll be a millionaire. This is not something that's hypothetical. At that number, at a conservative ten percent, that's what it's going to average.
And it's one of these things that it's not even.
It's just basic math, right, This is that's like life assurance is the easiest way, but this is another damn guaranteed way to make your child a multi millionaire. Now, once begin we never said when we said make your child a millionaire. We never said that there's gonna be a millionaire tomorrow. But once again, we talked about generational wealth. So the whole point of it is that the child should be equipped to be earning money, to be doing things as an adult.
Right. Everything that they've given is.
Extra add ons for them, right, So this isn't like the only thing that they should be like relying on as a twenty five year old. But like I said, if you can, one of the biggest problems that we have in a society is retirement. And they're already talking about cutbacks on Social Security. So if you don't have to worry about retirement, how much more free? I know people that take jobs just for retirement benefits. Yep, you work a job for thirty years just because it has a good pension.
People will retire and go back to get a part time job because they need the insurance.
Yeah.
Sure.
And here's the thing, right, like, yeah, fifty sounds if you're sitting in your twenties and your thirties, Like, sixty sounds like a long wait, Like we just I just turned forty three years ago.
You just turned forty a year ago.
At that same rate, you're still at that ten percent, right, just from them five years from twelve to seventeen, that ten percent compounded turns to nearly six hundred thousand by forty. Yeah, Like, what did you get a six hundred thousand dollars take in forty? I might have missed it. No, I wasn't sitting there for you.
So yeah, on five hundred and thirty one thousand dollars bout forty. So like I said, you don't. It's not like a locked up and a trust. You can take money out of the IRA whenever you want you'll pay you'll pay an early penalty if you take it out before your retirement. That's important to notice. But if you need money, like let's say you've got a brilliant idea you want to start a business, you can take the money out. It's never been taxed before, so you pay tax.
You'll pay taxes on it, you'll pay a penalty tax. But ideally it's better to wait because you'll pay no tax. And like I said, keep in mind that money at sixty three point five million is tax free. So when you get your four one k, you're paying state and federal taxes on it. So your million dollars is really six hundred thousand dollars. This is three point five million dollars tax free money. So I mean, that's just that's
just the trim minut. And like I said, for a very short period of time, you just you paid seven thousand dollars a year for six years, and that that could be two thousand. Of course it's going to be a lower, but you know, you could use the calculator to see, Okay, if I put a thousand dollars and if I put two thousand dollars, and if I put
fifteen hundred dollars in right, what is that equal? But the bottom line is that relatively small amounts of money in a short, relatively short period of time equals huge amounts of money later on in lifeact.
This is a fact.
So that's another way.
So we got the life insurance, we got the IRA.
This is one of my favorite ones because it's something that we've actually been practicing, and that is creating an up my account for your child, right and UPMA stands for a uniform transferred to minus act and this allows you to hold access in your child's name up until eighteen to twenty one. And this is important, right, Like we talk about investing all the time on market Mondays, we talk about it here on Eolisia, and we're doing it for ourselves, right, And that's all great, But having
that asset for a longer term. Right, So I'm forty three years old, right, if I have at my hew for my son and my daughter, right, that account was open when he was seven and when she was ten.
Right.
I just told you about the history of the market. Eighty two percent of the time it has seen appreciation. If they start if I started investing at seven, what would my account look like now, knowing what I know, they have the advantage of knowing what I know, plus having the time that's factored into their lives.
Right.
So we're talking about somebody that's investments in seven, what does that look like at forty?
What does that look like at fifty?
Now the difference between that and UGMA, which we're talking about, is that you can have different type of assets. Right, So we're talking about cash, we're talking about real estate. We're talking about stocks that can all be held into account. What does that mean? That means that you can manage
that account. Again, educate your kid during the process. And so this is one of those things when we're talking about, Hey, our kids know what is hot, right, So when Microsoft is creating a product, or Metas coming out with a product, or TikTok is the hot thing. Or I remember a few years when we were talking about Rodblocks when that became a public trading company. These are now conversations that
we can have with our children. Educate them about what the publicly traded company is, but also allow them if they want to to.
Invest over the long term.
Now, the beautiful thing is that at eighteen, they now become owners of that account. So hopefully they've been practicing with it, right, They've been watching you invest, They've been watching transactions happen, they've been watching appreciation. I know for the past couple of weeks we've seen something depreciation. But that's why we're talking about long term holds. And so I know when we talk about two tech two index
and says that this is why. Right, if we have two tech companies and we have two indexes that track the market overall, that's a great basis to start for a child to have a long term investment. If we want in great invest in great companies, well we have that ability to do that as well. And so what
I've done is like I'll start to match. Right, if I see a good company at a good price in video which hit one hundred, not only am I adding that into my portfolio, but I'm adding into my child's portfolio. And the fact that I have too, when they can mirror it, it makes it even better because they're watching this appreciation go. The other part is the UTMA account. Now there's some differences here, right. You can put real estate, you can put jewelry, you can put commodities inside your UGMA.
Your UTMA, you can only this is key.
You can only have cash, stocks, bonds, mutual funds, and ets.
That's the biggest difference.
The UTMA allows more flexibility where you can have more different types of assets. And I know some people have collectibles that can be also passed down. At twenty one or eighteen, they now controlling This is no longer something that you can manage and is handed over to them. Hopefully you've given them enough guidance, You've given them enough education, enough resources to make positive decisions and good decisions inside that account. Because again they've had it for ten years.
Like I said, my son was seven when he started. By the time he's eighteen, i'll be eleven years for him. That has hopefully in it thus far as appreciated pretty nicely. Now at eighteen, if they've decided they want to start a business, this now becomes the seed for their business. Right If they decide that they want to go to college, here startup money now that.
They can pay towards tuition or whatever their endeavor is.
If they decide that, hey, I want to take a year of dad, and I want to work for you, and I want to use this to invest in my own form of real estate.
They can do that.
It allows your kids flexibility to have decision making power at a young age that can affect them for.
The long term.
So those are two accounts that if you're adult and if you're watching market mondays and you're trading now and this is easy to do, right, you go to your brokerage. Right, there's a tab it says UMA or UGMA. You can open the account. You can start deposit money to into that account now, and you can invest right. You can invest like I said, in indexes, you can invest in ETFs, you can invest in equities. These things are how you build wealth. We talk about generational wealth. Well, somebody has
to do it right. So if you're doing it now, you might as well create the habits that can be sustained and passed down for your next generation. Those are two positive ways to make sure so that you have generational.
Well, that's a fact.
And then there is so we do want to talk about something that Okay, depending on state law, you have to the child has access at eighteen or twenty one. But so how to make your child a millionaire? This is where this comes into play. Adding a trust, putting the UTMA in a trust account, so you can override that by having a trust account, right, because you're probably
not going to have a million dollars by eighteen. But that same rule applied for the raw FIRA can be applied for the UTMA right with no restrictions as far as when you can actually take the money. But now you can actually set stipulations and restrictions based on how you want based on a trust. So, once again, for the context of this video, we're not going to go into deep detailed about trust because that could be a
video within itself. But there are some different types of trust that you should be aware of with this too.
In particular that are most prevalent when we're talking about these type of situations is yeah, revocable trust, which is also known as a living trust, And the reason why it's called revocable is that you can make changes throughout the cost of your life, right, and then there's an irrevocable trust, which hence the name is pretty much you can't change over the course of your life, right, So one is kind of set in stone and one is
more flexible. But the benefit with the trust period is that it's asset protection as far as it takes the asset out of everybody's name, right, so it's out of your name, out of your child name. The trust. The trust is the owner of the situation, and that's great
for asset protection. We talk about a state planning for sure, but this for this conversation, we'll focus on rules and stipulations as far as you know, setting parameters so one of the you can go back to the regular One of the things about the UTMA that people are concerned about it is like, okay, well if I save us money and I put this and I give my child this money, well they're not gonna be ready for the eighteen and most eighteen year olds are not responsible enough
to handle six figures or seven figures. That's kind of even twenty one year old. Most twenty one year olds haven't have enough information, haven't had enough life experience, so it could lead to making bad decisions. If wasting the money, that defeats the whole purpose. So having it in a trust is beneficial because you get to dictate when and how that money is dispersed.
So you can say, okay, well.
The money I have a let's say you have two hundred thousand dollars in the first fifty thousand will be given to my child when they complete college.
But they have to complete college.
So if you don't complete college and you don't get the fifty thousands, the next fifty thousand will be granted upon on marriage. Right, you don't get married, you're not
getting fifty thousand. Or there's a provision that they can take fifty thousand out of the trust at any time that they're an adult if they want to start a business, but the business plan has to be reviewed by my accountant, and the accountant has to say that it's a legitimate business plan, and then they could get fifty thousand dollars that way. Meanwhile, this whole time, the money is still growing because we're still invested over the course of time.
So that's something that a lot of parents find attractive because it provides you a certain level of authority still over the money, the access to the money, what they're using the money for, you could be as detailed as as you want to be.
Yeah, that's an important fact.
Right, This is almost like putting the bumpers up right, So when we're talking about generations, yes, if you've taken these steps, yes, You're not going to be a millionaire at eighteen or twenty one, but the steps are now being prod for you to get to that level.
The problem is a lot of times.
We see when we get money and we don't know what to do with it, we tend to spend it and be frivolous. This is a system that it now has put up the bumpers, right, So you still have to work towards something in order to have that money, right, which is a huge incentive. I could imagine being eighteen years old and knowing that if I complete this task or if I've done this, that there is going to be that waiting for me. I mean, this is a game that the wealthier plan that we haven't had access to.
But fortunately enough that is changing.
So these are parameters, right, This is the key to sustainable wealth. Putting parameters in place that make sure that you won't ruin this, right. We want to make sure that this is sustained.
Yeah, so that's something that's vitally important to take.
And you can invest the money, like you said, you can invest the money in stocks, you can invest the money in ETFs, in deck funds, all that type of they even bitcoin through the ibit ye, So you know, you have different ways you can invest in money. So that's the third way that you can make your child a millionaire.
Now number four, This one feels like it's the obvious almost right, if we look at how wealth is built throughout America, is built through entrepreneurs creating business and having stock in that business.
The other way is only land own in real estate. Right, owning real estate.
And owning it and having it in a way that in a manner that now becomes beneficial for your children is number four for sure. But it feels like it's the obvious way that most people build wealth in our country.
And we've seen that over the history, right from reconstruction to the Industrial Revolution to post war to Redline, and we've seen appreciation in homes over time being passed down to families has created wealth not only for the owner of the home, but for generations of families thereafter.
So let's talk about some ways that can better fit your children.
Yeah, real estate, So I mean real estate is pret self explanatory as far as if you're a home owner or if you're a real estate investor, but you can going back to the trust, you can you can buy real estate and a trust and have your child as the beneficiary of the trust. So you can buy real estate in both as the purposes for your child right.
In the trust. And once again you can utilize.
That as leverage later on to a have them own the property outright or they can take over. As far as rental income, so like let's say you have a real estate property that gives you two thousand dollars a month rental income. Right, you can say, okay, when my child turns twenty five, they will be the recipient of that income, but they have to be the landlord on the property and these are the list of things they
need to check on the tenants. Now you're actually helping the child learn real estate in real time because it's like, okay, now this is actually out for you. So you are going to receive the rent or part of the rent. But part of the stipulation for you receiving part of the rent is that you need to collect rent. You need to talk to the tenants once a month, you
need to check on the property once a month. So now you're actually grooming the child and be a property manager and to learn about real estate in real time. You're forcing them as opposed to them just collecting rent, you know, and not knowing anything. That's not really helpful.
Like the more you learn, the better you'll be. So structuring your real estate purchases, especially for real estate investors, having you know a property to how many you want in that trust, for the child to actually be the owner and set point or to be the beneficiary as far as rent or have some level of control, that's helpful.
It's beneficial as well.
So that's another way as far as you grow money with stocks, but you also grow money with real estate, and you can buy property. You can actually buy a property in the up account as well, that's what I'm saying. Yeah, but you could buy a property for your child, just like you could buy stocks for your child.
Yeah. And that's the beauty of the UPMA is that it allows diversified assets. We talk about stocks, to talk about bonds, but it also allows you to have the real estate piece. So those rates you can put them in your portfolio, you can put them in your child's portfolio. So whether it's I know, a lot of assignment properties is a huge one.
PK. There's another one.
Crown Castle has been one that's performed, well, all those rates can now sit inside your child's portfolio and watch that appreciation over the time, and that can be passed down and passed down. So these are the ways when we're talking about, Yeah, if I can't buy a home, or you don't have to buy a home, right, that'd be great if you can have land ownership, But there's other ways to own real estate that we need to take advantage of.
Yeah, And that's the good thing about real estate is that, like I said, especially if you're an investor, you can buy let's say you buy a two hundred thousand dollar condo as an investment property, So you buy a condo in the trust trust owns it and you're the owner of that property. As far as like when the rental income comes, you can stipulate from the trust that you actually get the rental income. So now every month you're getting rental income over the course of twenty five years, right.
But that what also is happening over the twenty five years is that the property is appreciated, So you're benefiting in your lifetime or as long as you want because you're actually you brought the property and then you're actually getting rental income from the property. Now the property is actually increasing over the cost of time, and it's in the trust and it's designated to go to your child
at said age. So now when the child, let's say that two hundred thousand dollars property in twenty years is now worth five hundred thousand dollars. So now the child at that point in time is handled the property. But you've correct you collect the rental income all this time. What you can also say is that part of the transfer is that we have to do a refinance, and I have to I'm going to take two hundred thousand dollars.
You're going to refinance the property, and there's probably at that point in time there's three hundred thousand dollars equity in it. So two hundred thousand dollars is going to be paid to me. Why would you do that, Well, you've paid. You've paid yourself as far as what you actually have paid into the property, right, and so you
won two ways. Let's say you like, and we're just using a cash example, you pay twenty thousand dollars cash for this property, and you're getting two thousand dollars a month, so you've gotten two thousand dollars a month for twenty or thirty years. You won in that scenario because you've had income coming in every single month, and then you're getting your two hundred thousand dollars that you paid for the property back before you transfer ownership to your child.
So your child is still benefiting because they're receiving an asset and the rent is probably now four thousand dollars a month, So even though they're refinanced, the refinance is probably like eighteen undred dollars a month, but they can cover that from the four thousand dollars a month rent
that they get, so they're still netting. They're still netting twelve hundred dollars a month tax not tactical, but they're still netting two hundred dollars a month, and they now have a property that is worth five hundred thousand dollars. So in that scenario, nobody lost because you didn't lose any money. You actually made money from the rental income and you got your money that you paid for it back,
but you also left something to your child. Well that's that's even better than the stock situation, because in the stock situation, you're just putting money into stocks. You're not getting that money back unless you put a stipulation in the trust that Okay, I'm gonna have to take money out of your brokates account. But in this what you could do that if you want. But in this situation, you actually got all the money back. You made money, the child's making money on the rental, and they have
an appreciating asset. So you know, there's different ways that you can you can go about it. But before you set up a trust, of course, you you have to talk to a lawyer. That's important, so you know, seektly counsel see which trust is best for your situation. But you know, this time to kind of get some ideas.
I mean, it's important, right setting up a trust, having an attorney, setting up in a state a plan is important. And that can't be expensive, right, Like that's something that people like. It sounds good, but you have to prepare for that, right, Like, I know, I just did one for my family. You did one for yours recently as well. Yeah, it cost us a couple thousand dollars, but we prepare
for it. But it's important to lay the guidelines down because yes, I mean, we've done pretty well but he wants to make sure that his grandkids and his legacy.
He's continued on.
I think the interesting part about what you just explained is that the same thing that you just did, your child can now do for their children at less of a cost. Right, because if it costs you to two hundred thousand up front twenty years of paying a rental income to get it back, well, they didn't have.
To go through that part. They've skipped that part.
They've jumped into the equity play, and now that could be passed down because the one thing we know about property is that it's going to go up.
Right.
The cost of living has gone up every year for the past ten years, and so that's going to continue.
Right.
The amount of land that's available to be built on, especially in the environments that we live in, is becoming scarce, right, and so property values go up, comps are going to go up. That now creates another chain of success for their children, but for your grandchildren as well and their children after that.
Yep.
Okay, So the last one that we'll talk about is stock gifting.
Remember that that post you put up like that was years ago when we were like yo instead at a baby shower getting gifts we should be Brian stocks that really didn't pick up.
People really didn't take advantage of that.
But that's one of these things, right, Like, if we know the advantage of investing in the market, right, and we have a child that is coming into this, wow, and it doesn't even have to be a baby shower. It could be any type of holiday. It could be
a birthday, it could be Christmas. Yes, it's cool to have cool toys and have nice items, but the one thing we know about those items is that they're gonna hold no value after we open and they're not going to appreciate in time, even if it's a collectible like a sneak or something. A child at seven eight not they're wearing that shoe and they're gonna wear that thing to death and it's gonna be worth nothing after it
was purchasing one. Whereas if we put it into an investment like a stock or on a etf on index, we know long term that that's going to appreciate, and so we need to get in the habit of at least thinking that way, right, we can now gift an asset that's going to appreciate over the course of someone's life, and even if they don't know, I think that's the perfect part of it. A lot of times and we've seen people be gifted stock and they're like, what is this?
What do I do with this?
It now becomes a teaching lesson again, Right, you always have to have an inflection point in any point of education. The fact that you've done something that is completely different than buying a PlayStation. Right, maybe you buy Sony stock in addition to it. Right, so now it's best of both for us. Well, here I invested it in the actual item, but here we invested in the company too. Here's why we did it, and here's how long you're
going to hold it. It's an inflection point. Now to increase the intelligence of a child that you know, that becomes contagious. Right, the kid now gets to explain to him his peers and his cousins and his friends what happened, and hopefully they explain to their parents. That's how you build education in the community. That digress, Yeah, for sure.
And the irs allows tax free gifts of eighteen thousand dollars a year.
HW.
So we have never really talked about gifting too much, but you can gift eighteen thousand dollars a year tax free. So we talked about the tax benefits as far as you know if you're a self employed person, but this is another way to kind of a tax purposes benefits is you know, when you're talking about stock gifting, the tax aspect is a major part of it.
So this is a you can you.
Can gift tax free up to eighteen thousand dollars a year, right and it doesn't have to be just stocks, but we're talking about stocks right now, so that's the main focus. But it's the same principles that apply when we talked about all of the other stuff. Right, you you can literally take ten thousand dollars a year and gifted to your child or to your grandchild, and that's tax free
and that same compounding interest growth will occur. So that's another benefit of you know, gifting is that the tax aspect of it, like, that's a great way to utilize the tax system in America and to still benefit the next generation.
Yeah, and and somebody's going to ask, well, how do I gift it? It goes back to the third way that we said that you can create a millionaire situation for your child, open the up my account. Right, that up my account is super important number. Again for the tax purposes, but again this is now something you can put assets inside of, whether it be collectibles, whether it be real estate, whether it be ibid us to invest
in bitcoin. This is a definite must if you're trying to build wealth for your children, right, you have to have a up account. In fact, I encourage everybody after they watch this video or tomorrow morning, go to your broker's account, whichever one you use. And I've done it on each one of them. So Fidelity has it, Schwab has it, e Trade has it, Open an up my account and just open it. Put five hundred dollars in there.
In the same way we talk about dollar cost averaging. Right, this is another key things the same way we talked about dollar cost averaging. Make sure that you have a plan into putting money into that up account. Don't just leave it at the five hundred that you did to open it and thinking that it's going to grow. We told you the threshold from a tax standpoint, we told you the things that you can invest inside of it.
Make sure that there's a plan to put assets until it can accumulate to something that's going to be worthwhile in the future.
So there you have it.
It's five ways you got life insurance, growth, ira UTMA, trust account, real estate, and stock gifting. And once again, this isn't something that you don't You're not making a child a millionaire tomorrow, but within their lifetime if done correctly, just one of these can make them a millionaire. And now if you do multiple can one of them can make them a multi millionaire. If you do multiple of these, then they could become extremely wealthy. You can set your
child up to become extremely wealthy within their lifetime. That might be at forty, that might be at sixty. But the whole point is that it's a marathon. So you can set your child up to be wealthy in their lifetime by taking steps in actions early on.
That's a fact. That's a fact.
There's going to be two types of people in the world, the bosses and the people that work for them.
De sidewise.
And another great resource personal finance is this book right here, Deserve to Be Rich New York Times bestseller. So I highly encourage everybody that's on the pathway to figure out finance, to learn about investing, to try to just become a better person when it comes to money. That is the blueprint that you that you can't follow step by step in detail. So the book is available wherever books are sold, and there's an audio version as well, so you deserve
to be rich. It's change the game personal finance, investing, entrepreneurship, mindset, variety of different things.
Cop it, share it, tag us. I love when people tag us when they're in the bookstores and they purchasing it. I love when people are personing it for other people and tagging them is definitely a game changer. I think I'm gonna go in a bookstore and just start signing. Well, I have to purchase anything. If I just start signing the ones on the shelf, it kind of adds to it. It's like an autograph copy. Maybe maybe yeah, I'm gonna
do that in New York. I'm gonna do that in a in a store and just let people know that the books are signed here. Come click them up, run it up, y'all. We appreciate all the love for it. New York Times Bestseller is not an easy feed. It's not something that happens every day. But it doesn't happen without y'all, So we appreciate the love and support.
Appreciate it, and once again ianinvest dot com. Yes, there's twenty four hours left, there's one day left, fifty percent off of stock club and three years a sniper, so you can go to ianinvest dot com.
Take advantage of that. And that's it. Guys.
It was love.
We'll see you later peace.
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