 Once again, ladies and gentlemen, boys and girls and children of all ages, you are now tuned in to Think Tech Hawaii with your host, the Prince of Investments, Prince Stikes, coming to you guys and girls live all the way from the beautiful state of Denver, Colorado, via howl over Hawaii. You now tuned into the Prince of Investment and without further ado, let's jump straight into it. I almost forgot my little intro there for a second, but anyway, I am a little bit out of the weather here in Denver, Colorado. Denver, Colorado, of course, we didn't decide to do. It is already snowing here. That is correct. It is snowing in Denver, Colorado. But I'm still here. I'm a little cloudy. I'm a little out of the weather, but we're going to get it done. So today's topic is going to be in the description box. As you guys and girls can already see, we're going to talk about four ways you can invest for your child, four different camps that you can start for your child. I know I get a lot of phone calls, conversations, emails. I always ask me, hey, you know what? I'm looking to invest for my child. How can I do that? And the problem with that is that it seems like it's a plethora of information because I was one of the people when I started investing for my son. I had the exact same situation where it seemed like it was so much I could do. I didn't know what to do. And every day I was finding something. First, I started a checking account. I said, great. I started a checking account for my son because I didn't have one growing up, right? And again, once I found out I can invest for him in college players, I want to look at the college players. I got a college player. And from college players, I learned about different ways I can invest for. So then I jumped on to that. So it seemed like it could be a lot. So I have a pretty, pretty extensive experience in it, not every single one because I haven't used every single one, but I have enough knowledge to speak about it to maybe help you as you go down the path to select something. I'm just going to let you know what it is, give you the pros and cons, and you can pursue how you want to pursue. All right. Let's get into it. This is the first way you can invest for your child is via a custodian account that is correct. Number one, we're going to use custodian account. What is a custodian account? A custodian account is an account that you open up via, you probably can pretty sure you can open it up via most financial institutions, most brokers that are out there. You can use a TD Ameritrade, an E-Trade, a Scott Trader, Interactive Brokers. I'm pretty sure you all have custodian accounts. It's pretty much just like when you go into a bank account. If you want to open up an account for your newborn child, of course you can open it up because they're not of age yet, but you can open it and be the custodian of that particular account, meaning you'll be the parent or guardian of that account, a custodian account. You can open an account for the child, you can invest for the child. When a child turns AT or the minor, you don't have to be the mom and dad. You can't be the uncle. You can't be a school teacher. You can't be a mentor and do this for them. When you open up the custodian account, you can invest for that child. Once they turn AT or the account will become theirs. So let's list out some of the pros of a custodian account. A custodian account, you can go in, let's say if you want to buy McDonald's stock. You can do that in a custodian account for your child. If the child really loves Apple, Microsoft, send them a big Xbox fan, if you want to get a Microsoft or if they're a big iPhone person, they love the iPad, iPhone, you may decide you want to get them into Apple products, or you may want to get them into Microsoft, whatever your taste is. So you can go out and you can individually invest for them. So the money there, you get to, I'm looking at some of my pros that I wrote down, some of the notes I wrote down on the show, is that one of the things, one of the pros you get to have is that there's no limit on how much you can invest, you can put how much money you want to put it in. Another thing is the value of the account is removed from the donor's gross estate. For a prime example, the money that I put into my son's custodian account, it's not written away from my estate. It's not buying anymore because once he turns 18, it's going to be his, right? So that's one of the good things. You can open up an account, you can invest how much money you want to, how do you want to invest it with stocks, bonds, mutual funds, whatever the case may be, and when they turn 18 years old, he or she turns 18 years old, they count as theirs. Now the constant is taxes. You don't get any tax breaks when you do a 529 plan. You get a 529 plan, government actually when you make earnings or dividends, they can be subject to kidding tax, right? Another thing is the child will gain the rights to the account when they turn 18. I know I listed this as a probe, but it's also a con. You can probably guess why. When you build up an account, a child turns 18 years old, are they responsible to take their account? If my dad would have gave me a $30,000, $50 account, when I was at my 18th birthday, I probably wouldn't have brought a car, right? A lot of my friends, I remember that had accounts like that, they would not have brought cars, and they thought they were getting a good deal. They was like, look, I got this new fancy convertible, Lexus or whatever. It's two, three years old. It usually goes for $60,000, but I got it for $40,000. So I got a great deal, right? So do they have the level of amount? It's going to be a con as well. Another con is, the last con I wanted to bring it up, was when the child goes to go get four, if they try to go get financial aid, this will account against them. If they have a custodian account, this will account against them by having their own five to nine plan. So, you know, you're going to fill out the financial aid. If they're going to fill out financial aid, they ask them how much money they have, or this could go against them. That's some of the downplaying. Really, the taxes, I really think the biggest thing is the taxes. You don't get any tax breaks. You actually will have to pay taxes of gains and things like that if you decide to go out and rob. Right? Number two, what I haven't explored, what I'm very interested in, number two, is a Roth IRA account. A Roth IRA account. This is an individual retirement account. Roth meaning that it is paid with after tax dollars. Meaning for a prime example, you get paid, after you get paid, you put money into this account. So, a Roth IRA is, that's pretty much what it is. It's a retirement account with some money. You get over one for a child. Most of us don't get Roth IRAs until we're adults for ourselves. I think it's pretty cool to get one for a child. So, let's talk about some of the pros of that. Contributions can't be withdrawn at any time. Just like in the custodian account, contributions can't be withdrawn at any time to do whatever you want to do. If they are used for educational purposes, they can be weighed from the 10% fee of early withdrawal fee if they're used for educational purposes. If they're not used for educational purposes, then you can be hit with the 10% early withdrawal fee. Another one is, you can invest in anything. You can just like the 529, you can invest in anything. Right? The value of the account does not count against you. Like the 529 plan, it kind of gets you, if you want to fill out financial aid, this does not kind of get you financial aid because it's considered a retirement account. So, those are the pros. Let's look at some of the cons. In the 529 plan, you can put whatever you want to put it versus some of the cons for the IRA. It's that you only can put $5,500 according to 2018 last year rules that's the maximum you can put it to an IRA. Only married couples that make less than $189,000 can contribute to it. We'll draw from IRAs. We'll draw from IRAs to pay for college does count as a base-to-year income. So, if you take your money for college, you can't be used as an income. So, it does have an income if you make up $189,000 as a married couple currently, you can use it. If you make more than that, then you don't qualify to use the Roth IRA for particularly for, you know, in general. So, $5,500, the maximum you can put it there does have a cap of whether you can put it there. But if you're somebody that looking at, hey, I'm not looking at putting that much in there a year anyway, then it could be possibly beneficial for you anyway. So, those are the pros and cons for the Roth IRA. I like the idea of a Roth IRA because everybody has a retirement account and by you, the earlier you get a child, starting with a retirement account is a pretty cool idea. I like the Roth IRA deal because once they turn $5,500, they can withdraw it without any of the penalties. I see people inside of a Roth IRA buy houses, things like that. So, I do like that idea of a Roth IRA. You know how currently I'm with a custodian, but I do like Roth IRA. Number three, we're going to go into the Coverdale ESA. Educational savings account. This is Coverdale ESA. One thing is you get the same benefits of the $5,200 for the most part. You can pull money out. You can pull money out to pay for education and you can pull money out for kindergarten to 12 grade if you're paying for private school things like that. So, you can pull money out at any time, without any penalties. You can invest it into anything. It goes against the parents, a state, not the students of the state. The cons are, so those are the pros, the pros. You get pretty much the same thing as the $5,200, but some of the cons are, for the most part, you only get to put $2,000 a year into it. Contributions can be made up to the child age of 18, but they have to be used by the age of 30. Only married couples are in between $190 and $220,000 are eligible to participate in the Coverdale ESA. So, that's the one for the ESA. Now, you have a couple other ones in here. You have the custodial account that we went over. We had the other one with your account. You can do a Roth IRA. You can do the Coverdale account. You can do a 529 plan. Other ones that you can do is BOS. They had one of them for BOS, mutual funds. I don't really count those as one because those are more investment interests, but they are not really particular accounts. So, one of the things you can do for your mutual funds, you can do with the index fund, which is considered a mutual fund. You can buy index and continuously invest it to the index over and over on a consistent basis. So, that's another one that you can do with that's number four. So, you got a custodial account you can do you can do a custodial account you can do a Coverdale ESA also, what's the other one that we had? 529 Coverdale and a custodial. Another one you can do is checking the savings account right? Number four, checking the savings account. Inside that checking the savings account, you can go in and pretty much purchase you know, just save up money which is probably not the pros of that is that it's very liquid, you can pull the money at any time, have no penalties you can put how much you want to put in there, you can put in your child's name you can withdraw at any time for any reason, with no penalties you have it's easy, it's very liquid, meaning you can get to it very fast or whatnot, but the downside the greatest downside to that is that if I'm invested for 10, 50, 18 years you know, that account is probably not going to keep up with inflation that's the downside, okay? So, by you going over time, you're looking at something called opportunity costs because your savings account is going to earn you probably about .02 or something like that or whatnot if you're lucky but you got inflation moving at a whopping 2% or maybe 3% in some years but most times 2% you have inflation running so that's the bad part about saving it a regular checking of savings account open up a regular checking of savings account you know, it's not a bad deal all four of the options are great ideas depending on different strokes different folks because some people like to get a checking account of savings account they purchase CDs which are very conservative you know, have little interest in today's low interest society but the problem with that the downside to that is the growth you're not going to be able to attach the growth to it so, hopefully that helps you out with the 529 plan the Coverdale ESA the Roth IRA that we spoke about and the savings of the checking account so, hopefully that helps you out that's going to be the end of today's show if you got questions or comments just drop comments below check us out at the description box thank you for checking us out here on Detect Hawaii I am the Prince of Investi Prince Dykes thank you guys for tuning in and until the next video podcast Cartoon or whatever else you see me do crazy around the globe peace, be safe, I'm out and thank you