Roth IRAs, 529 Plans, and Financial Freedom (Megan Russell on FamVestor Podcast)

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Childhood is a time of acquiring lots of behavior that will be useful for the rest of life. Just as learning to speak would be difficult if the child was never allowed to attempt to make the sounds, so too learning to deal with money is difficult if the child is never given the opportunity to attempt to handle it.

When it comes to teaching financial lessons, setting a good parental example is important, but actually giving the child some first-hand experience making wise financial decisions is essential. This includes both giving the child decision making authority with their own money and giving the child the means to earn money outside of or instead of an allowance.

In 2019, Megan Russell wrote an article called “Fund Your Child’s Roth with Chore Income” where she outlines how even very young children can earn income as household employees from their parents. She also detailed how her own daughter, then age three, was able to fund her Roth IRA via this earned income.

On Monday, October 26, 2020, Megan Russell was interviewed by Sunny Burns and Sunmarie Burns of the FamVestor podcast. That episode was just released Thursday, October 29. The FamVestor Podcast is all about Family, Finance, and Freedom. It is a weekly show which focuses on creating passive income streams, being frugal, living optimally, and designing a wholesome lifestyle all for the purpose of investing in your family.

The topic of conversation was children funding their Custodial Roth IRAs as a household employee, how to use a 529 plan, and in general what it means to experience financial freedom.

You can watch the video on YouTube here:

Here is an outline of the topics that were covered.

[0:00] Introduction

[2:00] Megan’s origin story on the Barbie aisle.

[5:30] Raising children to appreciate frugality and instill intentional practices when shopping.

[8:30] Helping your children fund their Roth IRAs. Misleading information about earned income, household employees, and record keeping for Funding a 3-Year-Old’s Roth IRA. The value of funding Roth IRAs when you are young even if you end up needing the assets later.

[22:10] The value and rules of 529 College Savings accounts and using that money for primary, secondary, or home schooling. Also, Who Should Own My Child’s 529 Account to Assist the FAFSA?

[34:00] The dangers and fears of the stock market. The stock market is like a whip being cracked by someone on an escalator. Should I Pull Out of the Stock Market Now? Keeping money needed in the next few years in bonds.

[38:30] Financial planning according to your values, including What We Can Learn From The Millionaire Lifestyle of Astrid Leong. How to pair down your spending with Core Values Budgeting. The lesson that Wealth Is What You Save, Not What You Spend.

[44:20] Favorite books or hobbies? Megan talks about the Disney Fairies books and movies she is enjoying reading with her 4-year-old daughter as well as her love of collecting board games.

[47:22] Sunny asks Megan, “How do you change the world?” Megan talks about bettering the world one article at a time. Sunny mentions reading “The Complete Guide to Your Clothes Dryer.”

[48:58] The value of a holistic, comprehensive financial planner with different service levels.

[51:20] A Case Study: Sunny asks Megan what advice she would give his co-worker regarding an inheritance. Megan says, “Save 97% of Any Windfall.”

Also featured in the video behind Megan are the oil paintings by Malcolm Hughes, the local artist we feature in our offices. Although the pandemic quarantines mean that few get to see those paintings these days, we are still grateful to display his work at our offices.

Photo is a screenshot from the video.

Follow Megan Russell:

Chief Operating Officer, CFP®, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 800 financial articles and is known for her expertise on tax planning.