The average American starts investing at age 31.
(Presumably when you have a job that helps contribute to an IRA or retirement savings account.)
That’s average. Knowing that a lot of us way past our 30’s have barely any savings at all, and many live paycheck to paycheck.
If you’re committed to finding ways to save, there are things you can do to give your kids a boost.
This strategy can give your child $1M before most people even open an investment account:
Contribute to a 529 for tax-free education money. New 529 rules have gone into effect in 2025. Technically, the 529 is owned by the adult & they designate a beneficiary (the child), but the beneficiary can be changed in the event that child 1 doesn’t have a need for all or any of it. With the new tax code, you can actually transfer that unused money into a ROTH IRA (also tax free)…but ONLY IF it’s had 12 consecutive years with the original designated beneficiary. 529’s can also be used for K-12 private school tuition.
Contribute to a custodial Roth IRA for tax-free withdrawals
Contribute some to a taxable brokerage for flexibility.
If you or grandparents can, IDEAL: At birth, invest $2000. Add $750 for each birthday. Then put $250/month into each account. (This is a big sum that most people don’t just have lying around. … BUT, as we’ll see, if you reassess child care costs & see if that’s something you really need or can afford, that’s a big chunk that could be invested. If you refinance your home, even just a percentage point can give you some wiggle room & you can invest what you’d been used to forking over for a mortgage without feeling the pinch).
Set up automatic monthly investments in each of these accounts & increase those contributions with each raise you get.
At 8% growth, your child will have $337,000 when they turn 18.
By age 30, they’ll have $1.2M!! Now that’s a BOOST!
If you can’t do those amounts, do SOME amount. Anything you start early gives kids the advantage of TIME. They have lots of time for their money to grow and can likely outpace US if we start them earlier!
We’re currently in an economy where home ownership seems elusive and young couples wanting to use this asset to invest in their future are finding the option is simply out of reach. I hear more and more people say that living on one income is nearly impossible anymore.
[Yet the cost of daycare can be as high as in-state tuition. In 2024, the average cost at infant child care centers in Tennessee was more than in-state tuition at all but one of its four-year, public universities, according to the latest State of the Child Report. At the remaining university, that figure fell only a few hundred dollars short of in-state tuition.
The Tennessee Commission on Children and Youth’s annual report listed the average statewide cost for center-based infant child care at $13,126 last year, while in-state tuition at the University of Tennessee was $13,484. The report also showed across-the-board increases from 2019 to 2024 in child care centers and group homes for both infants and toddlers ranging from $2,250 to $3,055.
“Child care costs continue to be out of reach for many families, particularly single-income households,” the report stated. “For many families, child care is the largest household expense, totaling more than their rent or mortgage.”]
With this the case, it seems even more impossible—or maybe even more imperative!—that we reduce our own debt, cut out all the fat and however possible, give our kids a fighting chance. As wages stagnate and homeownership slips out of reach, financial well-being has become more complicated and more precarious for young adults. Not to mention the prediction that AI will eliminate thousands of jobs in the coming years.
Live with a long-term view rather than short-term gratification.
Another way to give them a boost is to start establishing a credit history for them.
A recent article in the Atlantic (Michael Waters) looked into this concept. Fintech start-ups, such as Greenlight and GoHenry, advise parents on establishing a credit history for their children. And financial institutions such as Austin Capital Bank promise to improve children’s future credit scores with programs that allow parents to authorize the bank to take out and automatically repay loans in their child’s name.
In a 2019 poll commissioned by the consumer-financial-advice website CreditCards.com, 8 percent of the roughly 1,500 American parents surveyed said that at least one of their minor children had a credit card—presumably through authorized usership, because kids under 18 can’t get their own credit card. And data from TransUnion last year showed that nearly 700,000 22-to-24-year-olds had authorized-user accounts.
Most people in their early 20s will have a short credit history; you can’t even get a score until you’re 18. But authorized usership lets you begin building your report early. Depending on the financial institution, you can start this as early as age 14.
You can either give them a credit card (with a small limit) of their own, or just connect them as a user to your own account with no card.
- THIS REQUIRES VIGILANT MONITORING OF YOUR TEENAGER!!!
- YOU SHOULD NOT DO THIS IF YOUR OWN CREDIT PRACTICES AREN’T GREAT…because then you’re just sharing your “bad credit” with your child.
Your credit score doesn’t just determine access to a credit card or a loan. It can affect which job or apartment you can get and how much you might pay for car insurance or a security deposit.
The Federal Reserve Board introduced authorized usership in 1975. It was originally intended for married women, who until 1974 hadn’t been able to get their own credit cards. In an effort to ensure that these women’s long spending and payment histories wouldn’t be invisible, the Federal Reserve ruled that they could retroactively assume part of their husband’s credit history.
***Again, this trick works only if a child’s parents have a decent score. You obviously don’t want to make your child an authorized user and connect them to your credit if your credit is not the greatest. Linking them to your debt or poor credit history can hurt them.