Believe it or not, this seems to always be a polarizing topic. One side claims that for children to grow into adults, they will need to be thrust out into the world, alone. This trial by fire will help them discover who they are and where they are going. I can see this argument. This is how Kris and I began our lives at 18. We left our homes with nothing in our pockets. From these humble beginnings, we were able to build the start of an empire. The other side of the argument is just as strong. There are not a lot of people defending this side. This side realizes that the world is a different world than in the past. The prospects for our children our lower than at any time in history. For our kids to thrive in this new world, they will need assistance from their parents. Kris and I are on this side. I have closely followed this new world order. Student debt, low wages, shady corporations, and high costs of living all lead to unfavorable conditions for our children. However, if we all work together, this world is more than manageable.
So where do we go from here? We want to build a portfolio that will be instantly available for use when our kids turn 18. We don’t want to have to die for our kids to take advantage of the portfolio. It is important to remember that a balanced portfolio consists of a high yield saving account, bonds, stocks, and real estate. We want our kids to have exposure to a balanced portfolio. Let’s take a look at what we have planned so far.
High Yield Savings Account (HYSA): I currently use Discover as my HYSA. I have a checking account with a cashback debit card attached to my HYSA. This means that I can transfer money instantly into my checking account when needed. I plan on having roughly $20,000 in my HYSA when my firstborn leaves the house in 6 years. I believe I will add him as a member of my checking account. He will then be able to get a debit card. This way, if he gets in a pinch, we can transfer money to him via the checking account and HYSA. Of course, he should be building up his HYSA on the side as well. However, I understand all sorts of things can arise and I do not want my children getting into credit card debt if it can be avoided.
Bonds: We are currently purchasing $100 worth of bonds monthly, for the kids. These include “I” bonds and “EE” bonds. “I” bonds are like little savings accounts. You earn interest on them monthly. They can be redeemed after a year. If an emergency arose, these would be the first bonds to be liquidated. My firstborn should have roughly $3000 in “I” bonds when he graduates. “EE” bonds are a little different. They pay a much lower interest rate, however, if you keep them for 20 years, they are guaranteed to double in value. So if you bought a $50 bond in 2020, then it would be worth a minimum of $100 in 2040. The kids will have to hold onto these until they double, however, once they begin to double, it will be a monthly stream of income. Finally, there are 30-year treasury bonds. They pay interest semi-annually into a checking account of your choosing. I buy 30-year bonds monthly. As the kids grow up and get checking accounts, I will reroute my interest payments into their accounts. I shouldn’t need the money. This will be a nice little income stream for them.
Stocks: Stocks are always the most fun to talk about. Right now I have opened custodial accounts under the kids’ names. I have added some growth stocks, as well as, some dividend stocks. I would like them to have some nice capital appreciation (stock price going up) as well as a monthly income stream. The hardest part would be balancing it out. I am also building multiple dividend portfolios as well. I will always be able to transfer stocks into their accounts if needed. For the growth stocks, I mainly use Vanguard Total Market ETF (VTI). I also use Vanguard Long Term Bond (BLV). I will start investing in good dividend stocks for them as well such as AT&T (T) and AGNC.
Real Estate: We invest in real estate in two different ways; physical properties, and real estate trusts. We currently own 3 real estate properties. The kids will be able to leverage these assets to generate income. For example, if they wanted to go to a local college, they could stay in our smaller house in Florida. Then they could rent out rooms to 2-3 other college kids. They should easily be able to live for free in these homes. I also invest in Real Estate Investment Trusts. My favorite is Fundrise. Fundrise does not get traded on the stock market, so there are no ups and downs like a typical REIT. Once I am able, I will open a Fundrise account for the kids, so that they can also enjoy the nice dividends that it pays.
Putting it all together: If all goes as planned, the kids should have a nice start to their lives. I remember joining the Marine Corps with $10 to my name. Our kids will have a different experience of leaving the home. I don’t think the stress of having no money when I was young made me a stronger person. I think I was always a strong person. I believe getting through all the stress and decisions made under stress changes you. I want me and my kids to be a team. We make decisions together. I honestly don’t think the world is that hard of a place when we work as a team. I will look back at this article in a few years and see if things are going as planned.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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