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Dawsyn Pouncil is on track to become a millionaire by age 16. And she’s only 18 months old.
It’s all thanks to her mother, Dominique Broadway, an award-winning financial planner, CEO, and founder of Finances De·mys·ti·fied.
“We’re trying to set [Dawsyn] up for financial success in life,” says Broadway. “We definitely want her to feel financially empowered and never really have to worry about money if she follows along with some of the things we put in place.”
Among those things are a Roth IRA, a custodial savings account, and a custodial investment account. Between them, Dawsyn has amassed a little over $50,000, with all of that money earning compound interest.
Here’s how Broadway is investing in her daughter’s future and how you can do the same — whether you have $5 or $50,000.
The Story Behind the $50,000 Investment Portfolio
At 18 months old, Dawsyn’s investment portfolio looks like this:
She has a regular custodial savings account with a bank, where she earns interest on the cash deposit. She has a custodial investment account managed by the financial services company Acorns, with regular contributions each month. She also has a minor Roth IRA, which she’s eligible to contribute to due to her “income” from being a brand ambassador for Finances De·mys·ti·fied.
Dominique and her husband started Dawsyn’s investment portfolio right after she was born. Their initial contribution consisted of around $4,500, followed by regular contributions of at least $2,000 a month, sometimes more. Most of the money currently sits in Dawsyn’s investment accounts in various stocks and has reached $50,000 in 18 months.
You don’t need lots of money to start investing. It’s better to start early with whatever you have and let your money grow over time with compound interest.
Because Dawsyn is so young, her investment portfolio can afford to be aggressive, with high-risk-high-reward investments like stocks, international equities, and aggressive mutual funds. If Dominique continues her regular contributions of $2,000 a month and is able to benefit from a similar rate of return of 10%, Dawsyn’s portfolio will be worth $1.1 million by the time she reaches age 16. “These aggressive investment strategies and active trading is what’s driving a high rate of return,” says Broadway.
When asked why she set this all up for her daughter, Broadway has a simple answer: “Why not? Why would you not want to set your child up for financial success?”
Broadway recalls how her grandfather started saving for her as soon as she received her Social Security number. He invested in Series EE Bonds, a type of U.S. government savings bond guaranteed to at least double in value over its 20-year term, from the time of Broadway’s birth to when she went to college. Because of his investments, which started out small but gradually increased as his income would allow, Broadway finished her undergraduate degree completely debt-free.
“I realized how beneficial that was, how that propelled me to be able to start investing in real estate and doing these other things earlier in life by not having all these extra financial pressures,” says Broadway. “We want to do the same thing for our children, right? We want them to be financially empowered so that they’re not having to worry and stress about money, so they can really go out there and do whatever they’re supposed to be here to do.”
That’s also why Broadway has built her business around helping people learn about financial literacy and building wealth. “I’m dedicating my life to helping people, especially a lot of people of color that don’t have access to this information, to get access to the information because it can be the thing that changes the financial situation for generations.”
How to Set Your Children Up for Financial Success
Here are three things Dominique is doing to provide for her daughter’s financial future and give her the knowledge she needs for financial success. And you can do the same, regardless of how little or how much money you have available right now.
1. Open these three accounts
Broadway recommends three account types for your child.
“You don’t have to do all three,” Broadway advises. “Pick one based on what works for you, your financial situation, and the goals you have for your family and your children.”
Custodial savings account.
A custodial savings account is the easiest to set up and perfect for anyone who’s not ready to start investing yet but wants to put aside money for their children, says Broadway. It can be opened at most banks or credit unions and will let you hold and manage money for your child until they reach the age of maturity.
Custodial investment account.
Another option is a custodial investment account, which is similar to a custodial savings account in that an adult manages the account on behalf of a minor. “The only difference is that in this custodial investment account, you are able to actually start making investments for your child,” says Broadway. And the barrier for entry is lower than what many people assume. “Don’t feel like you need a lot of money,” she adds. “You can literally start investing for $5.”
529 college savings plan.
For parents with college-bound children, a 529 college savings plan is a great option to help save for your child’s education. With a 529 plan, you contribute a certain amount of money to be invested in mutual funds or exchange traded funds, with the investment plan tailored to the target date of when your child will go to college. Some states allow you to use those funds for private school tuition as well.
A major draw of a 529 plan is the tax benefits, which may include both federal and state tax write-offs and credits. Different states offer different 529 plans, so be sure to check the details of your state’s plans on the official College Savings Plans Network website. Some state’s 529 plans don’t even require the owner or beneficiary to be a resident.
2. Start investing early
“I tell people all the time, the earlier you start saving, the less you have to save because of the power of compound interest,” says Broadway. “So start small. Don’t feel like you got to have millions and billions and trillions of dollars. $10 a week, $10 a month, just do something.”
You can sign up for a high-yield savings account with no minimum deposit and start earning interest right away on whatever money you have. You can also open an investment account to let your money grow faster. “You could start investing for yourself or investing for your children for as little as $5,” says Broadway.
If you don’t currently have kids but would like to build a savings portfolio for future children, you have options as well. Although you can’t open a custodial savings or investment account in your child’s name until they have a Social Security number, you can open a dedicated savings account under your own name for the purpose of setting aside that money for future children.
You can also open a 529 plan for another child, such as a niece or nephew, Broadway says. If you later have children of your own, you can change the beneficiary recipient.
Whichever way you choose to invest, “don’t procrastinate or feel like you don’t have enough money,” says Broadway. “Just start with what you can.”
3. Talk to your kids about money and let them participate in the process
“My family always talked about money, like, all the time,” Broadway says. “Not in a negative way. And always really in optimistic, positive ways and just showing me that money was a part of our everyday lives.”
She plans to do the same with her daughter. “Having those conversations really early is something that’s important,” she says. “We want finances and investments to be daily conversation pieces in our home.”
Another thing she plans to do as her daughter gets older is to let her participate in the investment process. “One of the things we plan to do with our daughter is making sure she’s involved with these investments,” says Broadway. “As we’re picking stocks, [we] let her pick the stocks.”
For parents who are searching for ways to initiate a conversation about investing with their children, Broadway recommends looking at companies that their kids already use and love. “That’s going to be the best way to pique your children’s interest into potentially investing and owning,” she says.
“I think that as parents, we should be talking more about ownership with our kids,” she adds.
There’s power in being a partial owner of a company instead of just being a consumer, Broadway believes, and she plans to teach her daughter that as soon as possible.