 This is Think Tech Hawaii. Community Matters here. Guys, welcome back to The Prison of Investment, right here live in Haluahua, Hawaii for episode 7. And guess what? We still haven't gotten canceled. That's amazing, right? But thank you guys for joining us back here in Hawaii. Yesterday was my birthday. Actually, I turned 33 years old, you know, getting a little bit older. So thank you guys for everybody that sent me birthday wishes, all the other great stuff. Today is actually my eight year anniversary today. So life is going pretty good, so I can't complain about that. But anyway, guys, as you guys can see in the description box or you guys can see in the title, this episode is going to be about five ways you can start investing for your children or child now. Now, most of you may ask the question, Prince, why is topic? Why you want to talk about why is that important? Well, the reason why it's important is that when we think about our children's, our nieces, our nephews, or whatever they're doing in the future, we seem to think about their future when they're about 16, 17 years old, not everybody. But most people start to think about it when they get those scholarships, or they're starting to want a car, or they start to get ready to go to college, stuff like that. We start to be like, wow, how is my daughter or son? How are they going to be able to go to school? Or how are they going to be able to do XYZ? So the thing about it is, what if we increase the time horizon? Instead of waiting, what I mean by increase the time horizon is, you know, time horizon goes and means that how long you have for a particular investment. So for a prime example, someone may say, hey, I want to invest for one year, two years, three years, five years, 10 years. And of course, the longer time that you have of investing, the more of compound interest will accumulate. What does compound interest mean? Your interest earning interest. So instead of waiting until the child is 16, what if we start looking at when there was one, two, three, four, five, six, seven, and eight, why they're in elementary school, maybe even why they're in middle school. And that will give us a longer array of being able to figure out when they want to invest. So in this episode, I'm going to give you guys five ways you can start doing that today, and five ways you can start now. Now I want to give you guys a simple mathematical equation, right? When we think about investing, I'm not here to say, hey, you do this, I'm going to help your child become a multi-millionaire and all those other crazy stuff like that. That is not the objective. The objective, my personal objective is to say, hey, I want you to make your child's situation better off than you were when you was a child. Ask yourself, when you graduated high school, or maybe when you graduated college, or whatever you may have done, ask yourself, hey, how much did I have? What did my parents give me? What did I have going forward into the future? The bad thing about it is nobody thinks about that until it's too late. Ask yourself, what did I have at that time? What did I have when I turned 18? What did my parents give me? And the question is, can I give them more? Can I give them more of what they gave me? That's the whole point of generational wealth. Those are the concepts we're talking about here. This is one of the topics of why we must do it now and why we started now. Make it better off than I was. So one of the first things you can do is a custodian account. What is a custodian account? What does that mean? There are all types of custodian accounts out there. How can I do this for my child? Let's think about it. If you want to start investing for your child today, one of the easiest ways, I won't say the easiest, it all depends on who the person is. But a quick way you can start doing that is to open up a custodian account for your child. Now where can you open up a custodian account at? There are plenty of online brokers. Or you can go to maybe your local bank or your local broker or something like that in your area. For example, the ones that you have online, you have places like E-Trade, TD Ameritrade, Scottrade, Charles Squab. The list just goes on. There are plenty of online brokers out there. So what you do is, since your child is only maybe one, two, three, four, five, they are minor, they can't open up an account for themselves, but you can open up an account for them up on their social security number in their name. Now when you open up this account, if you don't know how to open up one of you scared, if you don't trust myself or whatever, you can go to the investor's show on YouTube and get a step-by-step tutorial of how to do that. Now, back to the point I was making. So when you go to one of these websites, you start a custodian account. When you open up that custodian account, there are a numerous of things you can do with that account. Once you open it up, you can go in and you can purchase stocks for your child. You know, you can make it, you can make it a fund. You and your child, for example, right? You can make it interactive, what I mean. You and your son, or you and your daughter, you and your nephew, your niece, maybe your neighbor's kids, whatever the case may be, your grandchildren, whatever, you sit back and you make investing fund. Hey, you know what? What are some of the companies that you like? What are these are some of the companies that I like or what the case may be? And what that does is it gets the child into investing at a young age. It gets them the whole idea because one of the big things that I see in the financial industry and around the world is that the industry is catered to fixing things. The industry is catered to fixing the issue. Whatever that issue may be, oh, well, a lot of people have messed up credit or bad credit, so these are ways that we can repair it, right? What are ways that we're looking at preventing? What are ways that we can prevent kids not going into not investing, right? So why is it important? The reason why it's important is that when they become older, when they're in the 20s, the 30s, they become young men and women, a way of the case may be this is not something foreign to them. They need to learn how to invest, and if it's not the market, look at real estate. You don't have to, you can open up a custodian account and purchase a acre of land, a lot of land, anything like that. So you open up a custodian account, you can go and you can purchase stocks. You're like, hey, I don't know what stocks to invest in. I don't know what to invest in or whatever the case may be. You can invest into the index. And the reason why, let me give you guys a simple thing. The index, the S&P 500, the Dow Jones, and the Nasdaq. Of course, they're all-time highs right now. We're in a bull market. We've been in the bull market now for a couple of years. But historically, over time, over the last 100 years, the index has usually returned somewhere between 5% to 7%. 5% to 7% historically. Yes, it has its ups and downs and it crashes and stuff like that. But historically, it has beat inflation. Prince, why is that important? Ask yourself today, if you did invest, what would you do with your money? Ask yourself a simple question. Well, if I don't invest, what would I do? Would I put in my savings account? I'd take it up under my mattress. I don't know. Whatever case, whatever you're into. The thing is, the whole idea is that you must put your money somewhere because it's this thing that you can't see called inflation. You see inflation, but you don't feel inflation. Inflation is important because when you're looking for inflation, not looking for inflation, when you go to the store and you go to purchase something, you know how those prices just keep gradually going up? Take me, I'm 33 years old now. Man, I'm feeling old. It's kind of funny to say 33. But the thing about it is, when you're looking at these particular things in a store, I can remember when I was in high school, what a can of cocoa costs. Today, I would say the average of a can of cocoa maybe costs you $1. Back when I was in high school, it was probably around $0.50. If I go ask my grandparents, they'll probably tell me $0.05, right? And ask yourself, one day you're going to be the old person where your kids and your nieces and nephews or whatnot are going to be like, oh, a can of cocoa costs $2.00. You're like, wow, why? I remember when I was younger, it only cost $0.50. But that's the thing to think about. When you look at those are the prices of everything that's going up gradually every year. Inflation is historically around about 3% a year annually. So if you have your money and your savings account under your mattress and your pocket and cash, whatever the case may be, you're losing purchasing power. What is purchasing power? Purchasing power is your ability to buy something. You're losing that every single day, whether you know it or not. Purchasing power doesn't go in your account and take away $5. It just sits there. If you have $1,000 in your account today, it would just sit there. But when you go to the store 10 years from now, you take out that $1,000 and you go to buy something, you're going to notice you're not going to be able to buy as much as you used to. And you can say that from 10 years ago from yesterday, right? So it's purchasing power. That's why we must learn how to invest, of start to invest. And by doing this with a child at a young age, you kind of put it in their mind, it becomes regular. It's not a foreign language. Look at some of the past guests. Look at the last guests we had last week. Matter of the world peace. One of the things he said was, you know, we just don't know. You know, when I was, he was the first round drag picking to the NBA and he was one of the lucky superstars to do 15 to 16 years, you know, as a professional athlete in the NBA. But most people are not. Most people are going to do one or two, three years if they even get to the pro level. But the thing about it is it doesn't matter what field you go to in life, no matter if you're a lawyer, no matter if you're a doctor, no matter if you're a truck driver, whatever the case may be, a school teacher, you will get into investing or have to learn to invest some type of way. But this real estate, your business, someone else's business, the market or something like that, you have to get into it. And in the market itself, the stock market itself is the heartbeat of the economy. You don't believe me? Go back to 2007, 2008. I bet you a lot of people can tell you how, when that heartbeat slowed, you can tell how the economy, how it affected, how it affected the world. So that's one of the things. Start a consulting account, get your kids involved, purchase stocks, or you can just purchase the index. And let me give you guys a cool number before I go into number two. We're going to say a lot of people say, hey, you know, I used to think that way too. When I heard a word in investing, I thought about stocks. I said, man, you got to be rich. You have to be like, super rich, have a lot of money. So we're going to say something if a mom and a dad, they have a child. They said the child was one year old today. And mom and dad has, let's say the dad stays up 25 bucks a week. Mom saved up 25 bucks a week. That's 50 bucks a week. And over a month, that's 200 bucks a month. If a parent did that, and they just say they went out and brought an ETF or an index fund that tracks the market, let's say ETF, because it's a low cost, they threw it inside of an index and they just invested into the index every month. They just invested into the market. No wild crazy stock out there, no crazy numbers and trying to get rich and trying to figure out this and figure out that. Just straight index, straight into the S&P 500 NASDAQ or something like that, right? If they did that, by the time the child turns 18, they'll have over $67,000. Now $67,000, is that going to make you rich? Probably not. But the $67,000 is a whole lot better than what most Americans have, right? Most parents can't even give their child $1,000 by the time they graduate. So $67,000, that's not too bad. And that's over $200 a month every month, just gradually placed the index at a 6% interest rate. Was that hard to do? Is that hard to do? No, that's something you can start today with a custodian account, all right? The next thing, as you guys probably seen on the show in the past, we know that 92% of investors would not successfully beat the stock market over and over on a consistent basis, all right? We have people that go out there, they go out and they purchase stocks, they purchase different type of companies or whatnot, but it's hard to effectively beat the market consistently over and over and over on a consistent basis. So another way that we just spoke about people joining the index, purchasing the index and forgetting about it and putting it on cruise control, that's one way they can grow their wealth. Another way you can start today is we have new insurance products out there. Insurance is another investment. It's a thing of generational wealth. Think about it. One day, it doesn't matter what you do in life, I heard it from Jim Rome, I was driving to work this morning, I saw that, I was like, wow, Jim Rome had a good point. He said, it doesn't matter what you do in life, you're going to die anyway, you're never going to feed it, you're going to lose. I won't say lose, but we're all going to end up, no matter what we eat, no matter what you do, you're not going to make it out alive. That's the exact words he used. He said, it doesn't matter what you do in life, you're not going to make it out alive, right? So we know that one day, we all were deceased. And being able to pass on generational wealth to yourself, one of the ways to be able to do that to your children and grandchildren or nieces and nephews or spouses or anything like that, one of the ways you can do that is through insurance, purchasing insurance. When I was younger, I used to think insurance was for old people. Loud is boring, that's something that you get when you're old and whatever the case may be. I got it through my job and whatever the case may be, whatever, don't worry about it. But think about it, what if you lost that job? What if that job discontinued or whatever the case may be, right? We don't live in that economy anymore where people just get a good job and just do it for 40 years, right? You know, people have to be flexible, people get new careers. So what if, I don't know how much longer I have left on this earth, but I can go out and I can purchase insurance. Now, granted, there are all types of insurances out there. You got term, you got whole life, you don't know which one to get, whatever the case may be. But having insurance as a parent, being able to pass that down to your child, you could be making an investment into your child. So that's one of the ways to think about it. So insurance, but you have insurance products out there that track the index. But I'm going to get more into insurance products that track the index. We're going to take a quick break. Stay tuned as I give you steps two, three, four, and five of ways you can start investing for your child right now. This is Think Tech Hawaii, raising public awareness. Hi, I'm Pete McGinnis-Mark and every Monday at one o'clock, I present Think Tech Hawaii's Research in Manila, where we bring together researchers from across the campus to describe a whole series of scientifically interesting topics of interest both to Hawaii and around the world. So hopefully you can join me one o'clock Monday afternoon for Think Tech Hawaii's Research in Manila. Five ways you can invest for your child starting today. We already went over number one, custodian account. Number two, before we went into commercial break, we were speaking about your insurance products. Now with insurance, there's two types of insurance. You have term insurance and you have whole life insurance. Term insurance is an insurance policy that covers you for a particular term, hence to the terminology term. Whole life insurance policy is a policy that covers you to like 125 or your whole life. The big difference between those two is the whole life insurance policy is more expensive than a term life insurance. Why you ask that? Because think about it, today I'm 33 years old. If I go out and get a 30-year insurance policy, I live till I'm 63 years old, the policy goes away in most cases, right? Now that policy is going away, I have to go out and get more insurance. Versus a whole life, the like little me said 125 is probably not going to happen, right? So they're usually more expensive. Some people say, hey, don't get a term policy. Some people say get a term policy because it's way cheaper. You can take the rest of that money and invest it. Some people say, hey, get a whole life policy because you never know what you might develop in life. Let's say at the age of 62, let's say if I got a 30-year term policy and at the age of 62, I developed a life-threatening disease like cancer. Now I have to go out and try to get another policy and hope I get covered at the age of 62 or at the age of 63 when my policy, not collapses, but when my policy is done or terminated, when my coverage is terminated, now I have to go out and see can I get another insurance policy with a life-threatening disease? And good luck of maybe trying to get that. I'm pretty sure I know people have it, but it's no guarantee. Now the thing about it, what an insurance policy do is that you have insurance products out there that are investment vehicles as well. That's the whole thing that I'm hitting about number two. Looking to insurance products that you can purchase for your children that can turn into investment vehicles because, for example, you have index universal life policies, whereas in let's say those parents that had 200 bucks, they can purchase an index universal life policy that tracks the index. They can get life insurance, the universal piece, being that they say, hey, I have 200 bucks a month that I can put aside for my son, daughter, niece and nephew, whatever the case may be. With that 200 bucks, it have a deaf benefit to it, saying that, hey, this person will be covered for this amount if they were to die. Then with the leftover funds of that 200 bucks, it can track the index. So now your child can have a life insurance product and they can also, they can have life insurance and it also can be covered, not covered, but also have an investment vehicle to be able to withdraw on tax-free in the future. That's another product that's out there, another way you can start investing for your child. Now, depending on what state you're listening in, what state you're in, you have to get a qualified life insurance agent in that state that can sell that particular product. Now, I don't know any particular companies because I know people listen to this across the world. So I don't know what state you're in or what country you're in. I can't speak about other countries, but I know here in America, those are things you're looking into, those are things, those are ways you can invest for your child because you don't know what your child may develop in the future. Today, they may be doing healthy and just well and everything could be amazing with them, but who knows? Two, three, four years down the line, let's see if they develop something, right? They develop a brain tumor, they develop, you know, God forbid any of that happens, but we have a thing logical. Things happen in life. You develop something and then when you try to go get coverage after you develop something, you may not be able to get it or it may be very expensive. So one of the ways you can do it is you can start putting money back for your child or you can get them into a particular life insurance coverage or something like that. That's the great investment vehicle. You will never run into a financial company that doesn't do insurance along with investments. They go hand in hand. So you need to think about them hand in hand. You can use insurance products as investment vehicles for your children. That's another way you can do it as well. Now we're going to go into number three, the most common one that most people talk about the most. People always say college funds. Now that's the thing about college funds, you know, which is the notorious one, it's 529 college plan, right? A 529 college plan is something that you could start for your child depending on what state you're in. And the thing about it is your earnings become tax-free. Your earnings, so you can invest into it depending on how your state is set up, Hawaii, California, Georgia, all have their own little investment vehicles or how they set up. But you can have it to where you can purchase a particular 529 plan and invest into it for your child in the future. The thing about it, the only bad thing, but I won't say bad thing, but the only thing about it is when your child turns older, not turns older, when they become older, when they become 18 and 19, those funds, excuse me, those funds must be used for college education, right? You can't say, hey, you know what, I want to go off and take off and start a business or whatever the case may be. They must be used for college education. And if your child doesn't use them for a college education, you can pass it on to their sibling or something like that. But those funds must be used for a college education. If you don't use them for a college education, then you can be faced with penalties. So one of the plus, one of the biggest plus of a 529 is the tax break. One of the downsides to a 529 is, let's say your child decided they maybe want to go to, they want to start their own computer business. They want to take their college fund money. They don't want to go to college. They want to start their own business. They want to become an entrepreneur. Well, it could be, you could possibly be liable to tax, not a tax break, but you could be liable to pay taxes on that money, depending on what your tax bracket is. So that's one of the things to think about. You know, versus a custodian account, when a child, like we spoke about, the number one, the number one step that you can do today, if you step into that one today, when that child becomes 18, 19, or 20 years old, they could possibly, not possibly, but they will have to pay tax on that money. When they go to withdraw that money, depending on what tax bracket you are there, they independent on how taxes are set up in your particular state. Federal taxes, they will have to pay federal taxes, but the money is free to do whatever you want to do with it, right? But in a 529 plan, if you don't use that money for a, to continue education, it could be taxed. That's the 529. The next one, number four, one that a lot of parents don't think about is credit. Credit is kind of seen as one of those adult things to do. You know, it's one of those things that you kind of like, ah, yeah, you know, you kind of figure it out when you get older. Ah, you figure it out when you're a child. Well, you know, whatever. Most of us don't figure out what credit is until we go to purchase something. We go to get a credit card, we go to buy a car, we go to get that first loan. That's when we figure out, oh, wow, you know, what is credit? Take me for example, I didn't know what credit, I heard of credit knew what it was, but I didn't get introduced into credit until I went to go get my first cell phone. And they went to go run my credit. I'm like, well, it has to be good. I never used it. So it's nothing in my name. So I don't have to be great. Didn't know that not using your credit or not having this is just seen as just as just as bad as not having credit. So what are ways you can be a credit for your child? One of the ways you can do is just say, for example, when it turns 16, you can take your particular credit card and you can put it into their name. You can add them as an authorized user on your credit card or authorized user on a bank account. Or you can get them a secure credit card, which means that you put 500 bucks on it and they only can use the 500 bucks. But those are ways, a little small ways, you can introduce them into this beast that they're going to face anyway, and that they can start building a line of credit and start building a credit history. That's a great way to build credit. Now, the downside to that is if you go out here and open up a credit card for your child and then go delinquent and don't pay the bills, then that's the opposite way. So with everything, there's a ying and a yang, but if you use properly, you can build credit for your child by doing simple things of adding them onto an account. If you got good credit and you always pay your bills on time, you can add your child onto the account as an authorized user. The name comes on the credit card doesn't mean you have to let them get in the credit card and let them go haywire, but it's a way to actually build credit for them, right? That's number four. Now we're going to go on to number five. We're going to talk about number five, then we're going to do a recap. Now with number five, number five thing you can do is to make it fun and interactive, right? Make it fun and make credit interactive. There are tons of games out there. There are games like Bull Bear Game that I became pretty addicted to. It's a stock market trading game, right? It's a stock market trading game. It's a where you can compete with someone else. For a prime example, I can download a free app and my buddy can download or a classroom can download it and you guys can compete, let's say in a five-minute span of trading the market. That is making investing fun and interactive because you can see it. One thing I struggled with when I was a child, when I was educating myself, I couldn't, I thought it a hard time to comprehend things that I couldn't see that was applicable to the real world, things that I couldn't apply, things that I couldn't really see and use. So those were the things that I was thinking about like, man, you know, I, you know, somebody would teach me what the stock is, but nobody would teach me how to buy it. Nobody teach me how it works. Nobody teach me how can I build wealth with it. So with this, to all these great things we said, we just spoke about insurance and stocks and custodian account, all the other great stuff, but to make it more applicable and apply them is to do fun things with it, play video games with it, make it engaging, engage your children. Hey, this is how you invest. This is, you know, I wish that was something that was introduced to me as a child. That's why I'm doing what I do today. So hey, you know, I didn't know that was a particular path until I got older. The most I knew about stocks was maybe a stock broker. I didn't know about investing that I could invest. I thought that was something that wealthy people did, but if somebody as simple as a hundred or 200 bucks can change the direction of your children's future. Now, another thing with doing that, you sit your children down. Hey, what companies you guys want to invest in? You guys monitor together. You're now conditioning to their minds of the world of investing. You're not telling them to gamble and to just jump into the stock market and stuff like that. You're letting them understand, Hey, this is your money. You put it here. You invest into a company to make more money. Now, are you absorbing risk? Yes. Hey, look, we lost some money when the company collapsed. Hey, when the company went up, we made some money. Hey, if we put our money here, they're getting their minds wrapped around the world of investing because it doesn't matter where they go, they will be introducing to investing. So we're going to do a quick recap. Number one, because starting account, something you can start today, go online and start a custodian account today, start investing into the index or any particular stocks or bonds or mutual funds or anything else out there that you may want to invest in with your child. Number two, insurance products. Look at insurance products for your child. Index Universal Life is one of the ones I explained here, but you and term life and whole life. But look at getting insurance products on your child. Some people say, well, children don't need it. They would never need it or whatever the case may be. But by the time they're in the age of 20s and 30s, this whole insurance thing could be paid off. Imagine if your insurance product, if your parents told you, Hey, you're 25 now, we got this insurance product, you'd cover for $200,000 that we already paid off. That'd be a nice little boosting. Like, wow, my parents have an insurance product that's less that I have to go out and get in this world. So then we had number three, five to nine plan, a college plan, where you can get tax breaks from the federal government. According to your state, you can purchase them via custodian accounts as well. Number four, bill credit, find ways to add your children's name onto your stuff, right? Number five, make it fun and engaging, bring them into the fold, let them know what you're doing for them. Get into children and investing and stuff like that. Check out local books and check out local cartoons and things like that, all right? So those are the five ways you can start right now today, investing for your child. As always, guys, this is the end of episode seven. This is the Prince of Investing. My name is Prince Dykes. Don't forget to check me out on YouTube, Facebook, Instagram and Twitter. Until the next video podcast, whatever you see me do crazy around the globe in the world, peace, be safe, I'm out and thank you.