This episode is brought to you by SmartVestor. Connect with an investing pro near you at ramsysolutions.com slash SmartVestor. Austin joins us up next in Knoxville. What's going on, Austin? Hey, Rachel and George. How are you today? Doing great. What's going on with you? Good. Living the dream, of course. Love to hear it. So my wife and I, we started the Ramsey plan a few years back and just started chipping away at it, kind of dive into that deficit. And we've since had a family. We chipped away at it and snowballed our debt and got to baby step number five. And so with the three kids, they're getting to the point where we're getting a little nervous because we don't have anything for them saved, dedicated just to them. So we were looking at different ways to get the ball rolling. And once you kind of get into that and open those doors, there's a lot of different options. Looking at ESAs, looking at 529s, looking at Roth IRAs. And then even within those, there's different layers for each one of those buckets. And there's a lot of variables in the equation. And everybody has, obviously, the unsolicited advice because we have three daughters. So once they see them all, you better start saving for college or for weddings and all this stuff. And so I guess the fear is, you know, we want to do something, but we don't want to make a decision now that our girls might pay for later on. Right. So how old are they? Nine, seven and five. OK, nice. We've got a decent timeline here until college, adulthood, weddings. And so the A1 is college and maybe a car if you're going to help with that. And so there's a few ways you can invest. I love the 529 plans are a great option for college saving, ESA also, but there's more limitations to that as far as your contributions. And then you can invest outside of that. And so you can do that in a brokerage account in your name. That's personally how I like it because you retain control. What scares me about some of these investment accounts for kids is they get control no matter what when they turn 18 in most states. And so you give a kid compound growth that's $100,000. If I'm 18, I'm going to blow that money. like, hey, this should be for a down payment for your future home or a wedding. And they're like, I'm going to go. I'm buying a Lamborghini. Your girls will probably never do that Austin But to George point it is You never know Yeah that right That right There is less control when it comes to that And at 18 yeah that a lot to give depending on how much you have saved So, yeah, so the 529 is a great starting point for the college fund. That's what my husband and I are doing. Our kids are very similar ages. They're 8, 10, and 5 or 6 now. Gosh, 8, 10, 10. Time flies. So, yeah, we have 529s for each of them. And then we've just kind of created an account in general. I think it's even just like an index fund, honestly, that we just throw money in each month that we kind of save. And it's kind of earmarked kind of for them in the future. So whatever that looks like to be able to help them, you know, and what they need, weddings. And, yeah, I mean, all that kind of stuff that just gets so expensive. And depending on when it hits, you know, it could all be at once, too. You never know. So that's kind of what we look at. Based on the options with the 529, I know there's the custodial option, right, where we have more control as the parents versus them. At the same time, if they don't go into secondary education, they want to do something else or they get full rides to wherever. I know there's options there for that money, but if you make the unqualified withdrawal, we're paying a penalty. There's disadvantages when we start to look at it. Yes, there can be. So the good thing is it grows tax-free, which is great. And then if you get a scholarship and grant, you can actually pull money out with that same amount. Yeah, pull it against the scholarship. So if you get a $10,000 scholarship, that's $10,000 you could pull out of the 529. And on top of that, with the new Secure Act 2.0, you can roll over up to $35,000 into a Roth IRA for them. And so there are more options. And I'd rather you have the money and not need it than not have it. And now they're turning to student loans and Parent Plus loans. Sure. That's the reality for most people. They go, well, I don't want to invest because what if we don't use it? And then they don't do anything. And so if I'm you, I'm going to open a 529 plan for each kid and then open a brokerage account in my name, like Rachel said, and just put money in there. And that becomes the future gift money, wedding money, whatever. Yeah. And in their name, Austin, my parents did this with Roth IRAs. Once they start working, like when we were teenagers and we actually filed taxes under our name. Once they've earned income. They have earned income. Then you can open up a Roth IRA in their name. And what wild is my Roth which I trying to think when mom and dad opened that for me I think I was probably 15 It when I started working at I thought you be like four years old I like well Rachel off No no no no no They did it the right the legal way I really did go earn an income, but they, and I think they even helped fund it, like, because it wasn't a lot of money. As long as you earn that level, they can fund it. So if you made seven grand that year, they can put up to that. They can use their own seven grand. Yes, exactly. In it. So, yeah, it wasn't a ton. Yeah, it was definitely not even seven grand. But what's crazy is starting that at 15 versus my husband started one after we got married. And just, you know, just a 10-year period. Like the difference in the compound interest. It's pretty wild. So you could do that later, too, for the girls as you're thinking about this. I have a feeling you're going to have a lot of options. But, yeah, you're not a big fan of the utmost, right, George? No, I just don't like the idea that the kids are going to have control at 18 because I just don't know what they're going to turn into. I hope they're wonderful, sweet children and they're going to be like, we want to give it to the old folks home. But there's a chance they blow it, prodigal son style. So I like retaining control personally. So I would do both. 529 plan and the brokerage account really hedges your bets. And it's okay to not be fair. You know what I mean? The nine-year-old should have more dumped in than the five-year-old because they have four extra years of saving and compound growth on their side. So it's okay to stay in the start. So you feel like more of a lump sum to start versus a higher percentage or both? If you have the money, I mean, if you've got 10 grand just sitting burning a hole in your pocket, you can front load that 529. And what's wild too, Austin, is you, we did this with our SmartVestor Pro. They can do a map. It's not 100% because we don't know the future, but they can look at the rate of which tuition has increased and how much money you have in to see and say, okay, you know, are you overfunding it? Are you not? I mean, they can kind of help you balance. And even, Austin, if you guys wanted to underfund it some, right, and you knew, like, okay, we may only have, I don't know, 30 grand in it per kid or whatever, even though college is going to be double that because we're going to do something else over here. But to George's point, you have to invest somewhere else the difference just in case they do go to school. But if you're scared they're not going to use it or whatnot, you could underfund it a little bit and invest somewhere else and use that money. And just be prepared to help cash flow if necessary. Or they're working part-time to help pay. They're also working on scholarships and grants. So it a great problem to have if all of your kids get full rides and the money sits there and you can change the beneficiary at any time That it too It can be passed down So your girls could even keep that 529 and give it to their girl right Their kids Like that what crazy about it is like you it can stay in It grows in perpetuity Yeah There was one call we took What was that last week, George, about the, the debt? Um, it was a, it was a man, he was like 40 and he had a call. I don't know. It was a call. It was something like that. And he ended up saying, I don't want to cash it out. I'm going to keep it. Yeah. Like a generational endowment. And he did the math and it would pay for like 10 kids colleges, like the next generation down because of the growth, like, which is just wild. So even that's something, you know, you can think of high level too. Awesome. So many options. A lot of options there. And that's where it was kind of like a little overwhelming for us. So we wanted to kind of throw out a lifeline to see if anybody had any good. Yeah, for sure. I keep it simple. I hope we help narrow down your focus to those two things. One for college, one for non-college. And then I throw in the Roth once they start working. That's right. That'll be later down the road. Get them working. that nine-year-old's uh you know might be coming up these kids these days they're always doing side hustles yeah they're gonna become you know world-renowned youtubers by 11 years old oh my gosh that's true that's what everyone's fear is they're like everyone's gonna just be like influencers and youtubers no one's gonna make so much money so it's a real fear because i do think college is due for a reckoning where families are waking up going why would i go to school unless you need to, unless you're becoming a lawyer, a doctor, a nurse, a teacher, things that require that degree. Otherwise, don't just go to burn some time as much as Rachel loved her college experience. I know, but I do think, and again, I don't know where I sit with this. I'm not at this age where my kids are having to make these decisions right now, but there is something when you're 18 to still be in a structured type environment. If you have the money, again, I'm not saying like, like, don't go take out crazy student loans and not know exactly what you're doing. Yes. You want a game plan, but there's something about those years that you're still in a system that helps you kind of like stay on track. You're in a little safe bubble to mature and grow and learn some social skills. They're still so young. I know. It's just a very expensive way to do it. I know. If you're going to go into crippling debt. So always cashflow. You can go watch Borrowed the Future for free on our YouTube channel. It's a documentary we did on the student loan crisis and higher education. Worth the watch with your kids.
