Financially Savvy Grandparenting - PART 2

It's time for another edition of Mr. Stillman's opus the financial advice and guidance podcast with Johnston job.

Let's see you and I looking for this conversation.

This is part two of six tips for financially savvy grandparent.

You and Molly, your wife tackle part one hour to move on to park to do what he was a quick recap of what you come to Portland so yeah hers was couple weeks ago what we talked about more from a parent's perspective of one of the things that you would like grandparents to do to help help you raise financially savvy kids or at the very least not obstruct if that's relevant to you to check out the podcast from a couple weeks ago is called financially savvy grandparenting not part one because we didn't know at the time they would be hard to like the battle of Bull Run in the Civil War. They didn't call the first battle Bull Run after the first battle. It was until they had a second battle Bull Run that there was a first battle Bull Run this they also didn't call World War I at first and then World War II. This happens to me in Microsoft Word quite a bit, well, make a list of something and I want to go back and add an addendum and so then I'll make it like 1B, but then I have to also go back and change it to Ia because I can't stand it. Just being one and 1BI, like skipping a split that night. I assume you have a whole debate or argument. Can you have one. And then one day in 1B getting off trust not very interesting. Cannot your last sleep till like that but I'm kind of weird so that's that's why right so that was part one or the original if we want to put it the right way perspective of six tips for financially savvy grandparenting that wasn't. It was this, this is today's the 16th is the six tips. This is not all the financially savvy grandparenting.

This is where we have the six tips you got left in the six tips what you did. Number one. Do not underestimate the power of the Roth IRA for young kids how young well will get to that okay so let's let's first understand what the Roth is all about.

You put the money and you pay taxes on it when you put it in but it all grows tax-free, which if you're 40 is still a pretty good deal because if you don't need that money for 20 years, that's 25 years of tax-free growth before you take the money out.

So that's a pretty good deal. But what if your 11 and you leave the money until you're 65. That's a lot of years of compounding growth on that money and so if you can take advantage of that for your grandkids, but that's a pretty powerful way to help them start saving you know at the point that they get done with college. They have at what II 10 year head start on retirement savings, which is if you look at the difference in compounding of 30 years versus 40 to 45 years. It's unbelievable. So let's think about the rules. So first of all to be able to contribute to a Roth. You need to have an earned income. So if you have a grandchild. They could be in college they could be a teenager if they have some kind of earned income their reporting on their taxes than they can contribute to a Roth IRA. So let's say your grandkids made $2500 at some job well they're going to report that on their taxes. They're not going to pay any taxes because you know they didn't really make enough but you could say look, I'm going to open a Roth IRA for you and I'm going to put $2500 and as far as the IRS knows that that the $2500 that they made is going in the Roth right. That's how much they can put in. It doesn't matter where the money came from so you can contribute to a Roth on their behalf. Maybe you don't want to give money to your grandkids. That's fine. But if you are going to give money to your grandkids.

This is a good way to do it because you're not just handing the money that they're going to blow when they're 16, you're putting it in a retirement account for them and they're going have really some just incredible. Compounding on that over the course of time so just something about very cool.

So that is the Roth IRA and you can start at very young for your grandchildren's you get started. Even younger, yet is certainly that you know they have to have an earned income like a said to be able contribute to a Roth, but if it's a family business situation you can actually outwork even younger in a family business, then labor laws would allow you to work. It wasn't a family business some extra ways to started even earlier rights of its tip number 14 savvy grandparenting.

What about number two.

Number two would be understand how to actually help with college savings. So as an example, any money that you put into it, like say a 529 plan in your grandchild's name that's going to count against them when it comes time to apply for student aid and things like that. So if you have some kind of arrangement where you're helping contribute to college savings for your grandkids. It's best if that money stays in your name not in your kids or your grandkids name because that's going to hurt them on their FAFSA forms when they're trying get some financially so as an example, he my parents give our kids $100. Every birthday to put in there.

520 on account if it's an amount like that. Not a big deal) that hundred dollars a year isn't going to grossly affect their ability to get any kind of financially down the road. However, if you're doing some kind of significant gifting each year to the tune of a thousand or more.

You're probably better off to keep that money in your name earmarked for your grandkids, your market however you want, just don't have it as an account in their name that makes an skeptical little trick, so don't take away from there. The help that they might get from the FAFSA or the state or any sort of financially mixed lessons to number three Find creative ways to help kids have an appreciation for saving and investing and I will actually turn to you because you have a great story to illustrate.

Yeah, I do chomping at the bit. Even with the Roth IRA thing because my grandmother actually never call her grandmother. But when I called her Nonie. Nobody really knows what I'm talking about, but that's what she is to meet sent Nonie and John would give me not you a different job or holder one.

Her husband, the motor once instead of thinking. John is not your actual grandfather is not, but they've been married for as long as I've been alive. They live in New Jersey. I thought John would be an odd name to call your grandpa but not cool cool guy and was addressing this Christmas anyway. They had a really cool idea for there were sort of three of us cousins three of three of her grandchildren that always got gifts for birthdays and Christmas and I think, but instead of doing the stereotypical giftgiving of you know toys that might just get thrown in the trash. A couple of days later or unappreciated. Or maybe it was a duplicate of something we already had.

She started a very young age infected soon as I was born every birthday and Christmas for the first couple years of my life were savings bonds.

Then she started.

I think when we were all five all of us cousins are all very close in age.

At five. She started gifting a stock and it was just 10 shares of Hershey 10 shares of Disney 10 shares of a power company 10 shares of but a lot of times it was fun stuff that we could identify with so and she would couple it with a really cool would always do a treasure hunt at Christmas where we go around and look for items and then in it and that would lead you to the next thing in the link to the next thing and then finally we get to the end and there will be little trinkets that led to what that years stock was in use, and we all got the same things done so anyway this happens for you know 15 and 20 years.

I graduated from college and now that whole portfolio is mine, and I've been able to see it balloon with the pre-2008 markets and then come crashing back down right as I graduate and then get to see the swelling increase once again in those accounts. In addition to the build up and just an incredibly cool way to learn about stock in money and finances him and that was the down payment on your first house. As I recall rate it was.

It was certainly helpful.

On the down payment and that basically my life savings plus some of the funds from that account paid for the down payment and then use some of the other funds from that account to kindly help fly the moving expenses that we are buying your first home. You often underestimate us of those came in very handy yet so that's that help me basically get into a home at 26 2012 for usual really cool idea that your Nonie had their did you tell her that I've stolen this idea oh yes I should have told her how awesome it's been and and she's I was a very intrigued by what we do now kind of working in the financial realm, but does she know I've stolen the strategy with my own children. Oh, I don't know shows that she will this Christmas yes.

So what we have this podcast. In fact, there you go.

I'm sure she knows how to listen to a podcast. She's she's getting there.

She's get to go to Gmail account. Let's step in the right direction. So basically what we did with Lily from I guess her first Christmas was we got her a gift that correlated to the stock of some kind.

We've actually done it for Molly's nephew Kyle as well. This will be Amos's first Christmas you're coming up I guess were pretty much roped into doing the same for him.

But the ideas we get a gift that is correlated to some gift of stock so we can do 10 shares.

Like your grandmother did, although I guess depending on the price of whatever stock it is here for for Kyle. The first year I think we did McDonald's for him. So a couple shares of McDonald stock so maybe two shares and then one of those little kids gift certificate will look good to go along with it.

That's really cool. So that was that was cool and I don't think it two and three and four years old. He really understands what's going on there. He'll be my guess, he just turned six this year so you know now he's got a few little things in his portfolio. If you will hopefully build up over the years, Lily. Certainly she just turned three. She's too young to really understand it but now the idea is that she'll have several thousand dollars in stock at some point down the road so it's awesome and it was very cool to be able to buy my first home and I think she was pretty tickled at you know after this year she got to see the payoff to go 20 years of gifting Mr. grandchildren and she basically helped one of her grandchildren by their first home and I was pretty cool to experience and then to kind of put On the store back to the Roth IRA example that was that was high school or college graduation was one of the two.

She open up a Roth IRA with an initial deposit night start contributing to that sound pretty cool, yes you, Sally. Jerry was she was doing so, she went to Rutgers I think. I'm sorry. None if I get this wrong. Think when she was may be 50 shortly after 50s went back to school what directors and if I'm not mistaken was the valedictorian at work for her class at Rutgers and became the vice president of a bank for the rest of her career since I saw a movie yeah there after basically being a homemaker for while all the kids were in the house she she's pretty cool Yep that is cool tell you what you do.

The remaining three next week.

Last summer, and have a part three and you have right now you Harley savvy grandparenting would have part kind of one part to you and how an official part three. Those that I love the Nonie stuff as you can tell her that we stole it and not only now for my own kids. But now my client how many grandparents have given their grandchild a stock in Harley-Davidson when they were like 10 is all that is also well and I would have to imagine there's some pride for her to to see you not squander that money when you're 15 or 16 right actually save it in something worthwhile with now if we if we can spend one more minute talking about this again because were going to put the rest of next week. Exactly so just for my personal learning perspective, it was great to buy the house, but it's funny to look back and see when I sold some of those stocks that we held onto for all those years to be able to make that purchase. But now to look at where the stock market has gone even above and beyond worry were in 2012 when I bought the home to be thinking about what that account would look like now.

So it still gives you that perspective now. I think I would learn from that again.

You gotta take again when you can get them, but it's a great example of how the fight held onto them even a couple more years. Look at what they could've granted second-rate perspective for saving many, many good job Nonie. Well done this but Mr. Stillman's opus MC for part three.

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