generational investing?

[steviesterno]

Since I started reading and learning about financial stuff at a later stage than some (30s) I have missed out on the time portion that factors into turning small amounts of money into big ones. What I'm thinking about is my kid, who is 7 months old. I opened a 529 for him since family wanted to contribute, and it makes sense for us and I will be chipping in some every month since we have 18 years for it to grow.  But what I'm thinking about is opening up an investment or retirement account earmarked for him.

Hear me out. I'm thinking something low, like $20 a week. but couple that with the fact that it could grow over many more years. This $80 a month investment would cost $19,200 over 20 years, but by why he turns 50 it would be something like $320,000 (assuming 7%).

is it worth it to set up something specifically for the kiddo to build a bunch of money like this over the long term? Or would it be better to throw all the money possible into setting myself up financially with the thought that he can have it when we die or FIRE and travel with us much earlier that I did if those turn out to be his goals?

I'm a little nervous about turning a kid out to be entitled or unwilling to work, so not sure we would tell him about it until he's old enough. My grandparents did a small version of this for my brother and I, and we each got like $10,000 when we turned 18. it turned out to be a huge helping hand at college time, and allowed me to back pack across Europe for a while and graduate undergrad debt free. My parents didn't even know they had been doing this.

I'm almost certain I could find the money in my budget for that expense. our ballpark financials are almost maxing 403, wife contributes 21% to 401 (with match), owe $190k on $260k house at a low rate, I have grad loans that go away in 6 years since I work a not for profit, $50k in our retirement stuff. Only recently turned to this lifestyle but growing into it quickly.

[Spiffy]

I am doing this. My three children each had a savings account where we put birthday/Christmas gift money. It was earning no interest, so I opened a Betterment account, where you can put money into different "pots". So I put each child's savings into a different pot and also put a very small amount into each pot every month. I told them that I am putting their allowance directly into their investments. When they get gift money they can spend or invest and usually they chose to invest. I get a kick out of it when they ask to "check on their investments".

[hoping2retire35]

Here is my plan.
1. Make sure I am FI and able to raise them without concern.
2. Have an extremely large Roth account. Whatever I do try to blow this thing up(size not destruction.)
3. teach them the value of saving and hard work now (all are 4 and under).
4. get them to work the day they turn 15 but probably do farm work or their own business(cut grass or baby sit or whatever at earlier age 11 to 12). I pay them to help me wash the car(hold the sponge and scrub one spot is about it) now.
5. make sure they are saving primarily in Roth. (I don't think colleges consider this for fasfa. Not sure when it comes to private university scholarships though.
6.I will try to buy jointly(mostly or entirely me financing the purchase) each of them an apartment to manage and collect rental profits at 18 or so. I will get them to help me with my own units while they are younger teenagers for the experience.
7. allow them to live at home or pay for housing and other very basic needs for a few more years.
8. I would guess they could be FI at 25 or so if they are frugal and have a job that pays even a little better than minimum wage.

EDIT: Roth is the best single tool, hands down, for doing just about anything financially related. Other tools have few features that are only minimunlly better and most of those are negated with just a little time, but the big reason is roth is amazing for inheritance.
The reason for giving them a rental unit as opposed to cash is for the fact that it takes away from the entitlement a little but also gives them a leg up for provable landlord experience when it comes time to get financing from a bank for additional units.

[Prairie Stash]

Hear me out. I'm thinking something low, like $20 a week. but couple that with the fact that it could grow over many more years. This $80 a month investment would cost $19,200 over 20 years, but by why he turns 50 it would be something like $320,000 (assuming 7%).

I'm a little nervous about turning a kid out to be entitled or unwilling to work, so not sure we would tell him about it until he's old enough. My grandparents did a small version of this for my brother and I, and we each got like $10,000 when we turned 18. it turned out to be a huge helping hand at college time, and allowed me to back pack across Europe for a while and graduate undergrad debt free. My parents didn't even know they had been doing this.

You answered your question. You had this done for you and backpacked across Europe with the money. Why would you presume that it would be left untouched until 50?

Your 529 will cover university, so really your asking if you should give your kid a graduation gift of $20k. If you feel the kid needs it at age 20 then just give the kid $20K from your stash. Any extra money you put in their stash could just as easily go into yours and then be split out later.

[clarkfan1979]

My mom had a rental house growing up. As a result, I was encouraged to have a rental house. I ended up liking the rental house thing, so I now have two. I will hopefully have my kids work on the rental houses when they are old enough and inspire them to do the same thing.

[triangle]

Just my opinion, but I think it would be a mistake to open an investment or retirement account earmarked for your first child. That instead you should put those savings towards your own earlier retirement and financial independence. Assuming you are successful with your savings over your lifetime and the typical life pattern of parents dying before children follow, then they will inherit from you one day soon enough. And nothing stops you from gifting them money from your larger stash to help them out as needed as they establish their future adult lives. 

If you were a grandparent coasting through retirement and wanting to do something like this for your grandchildren, I would be more supportive of the idea.