Tag Archive for: financial goals

How Can I Give My Kids a Head Start on Investing?

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The earlier you start investing, the better. You’ve likely heard this advice before, and hopefully it’s helped you make some smart financial moves. But there’s one group that may not yet know this bit of investing wisdom: the kids in your life.

Whether you have kids, grandkids, or nieces and nephews, these youngsters have an enormous asset on their side: time. Helping them get an early start with investing can give them a huge financial boost. The good news is that there are a lot of ways you can help set up the next generation for financial success. Let’s explore some options.

529 Plans: A Great Tool for Future Education Costs

With rising education costs, 529 plans are often the first type of investment account that parents open for their children. It makes sense. They’re one of the best tools available for long-term education savings. 

You probably already know the main benefits: tax-deferred investment growth, tax-free withdrawals for qualified education expenses and no federal contribution limits (though gift tax may apply beyond annual contributions of $19,000 for 2025). Friends and family can contribute, and funds can be used for a growing range of expenses: college, of course, but also up to $10,000 per year for K–12 tuition. And excess funds can be rolled over to another family member, used to pay for grad school or even used to pay off student loans. 

Custodial Accounts: More Flexibility but Less Control

But what if you want to help your child invest toward future expenses not covered by a 529 plan, like car repairs, travel or the down payment on a house? That’s where custodial accounts might be appropriate. UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts are typically easier to set up than a trust and can accomplish some of the same goals.

Custodial accounts let you invest in a variety of assets in a child’s name, including stocks, bonds, mutual funds and even real estate. UTMA accounts also let you hold complex assets like art and intellectual property. There are no contribution limits, and the funds can be used for anything that benefits the child while they’re still a minor. However, your child takes complete control over the account when they reach adulthood (usually age 18–21, depending on the state). At that point, they can use the funds for any purpose.

Note that investment earnings may be subject to the so-called kiddie tax. For 2025, that means the first $1,350 of unearned income is tax-free, the next $1,350 is taxed at the child’s marginal rate, and anything above that may be taxed at the parent’s marginal tax rate. Another word of caution: Custodial accounts are considered the child’s asset, which may impact financial aid eligibility more than a 529 plan would.

Roth IRAs: Even Kids Can Start Saving for Retirement 

If you’re thinking even longer-term, you can help your kids start saving for retirement by opening a custodial Roth IRA on their behalf. Roth IRAs allow them to enjoy decades of tax-free investment growth and tax-free withdrawals in retirement. 

To fund any IRA, the child must have earned income—such as from babysitting gigs or slinging ice cream over the summer. Those contributions cannot exceed their total earnings or the $7,000 annual limit (for 2025), whichever is lower. Then, once the child reaches adulthood (usually 18–21, depending on the state), they can transfer those savings to a new account to keep building a bright financial future. 

Beyond Investment Benefits: Teaching Financial Literacy

One of the best financial gifts you can give a child isn’t just money—it’s knowledge. And opening an investment account is an opportunity to introduce your family to some of the most important concepts in personal finance. 

You can start by talking to your kids about budgeting, saving and what it means to invest. Review account statements with them to highlight the power of compounding and the benefits of tax deferral. Use the target-date portfolios in a 529 plan to teach your kids about the value of diversification. Bring them into decisions when picking investments for a custodial account or Roth IRA. It’s a great chance to discuss the long-term advantages of choosing broader market exposure over trying to pick single stocks. 

The earlier a child understands how money and investing works, the better their odds for achieving long-term financial goals. We’re here to help you give them that head start—whether it’s setting up accounts, discussing financial strategies or sharing more ideas for teaching kids about money.

Veronica Cabral

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

How to Cultivate Financial Literacy in Children and Create a Pathway to Lifelong Success

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At the core of financial literacy lies a set of values and behaviors that extend beyond mere dollars and cents. As parents, caregivers, and educators, we have the unique opportunity to shape the financial mindsets of the next generation by imparting timeless wisdom that transcends monetary transactions. 

As we celebrate Financial Literacy Month this April, let’s commit to empowering our children with the knowledge, skills, and values they need to thrive in an increasingly interconnected world. Teach your children these  four fundamental lessons that build financial savviness over time.

  1. Believe in Yourself: Confidence is the cornerstone of success in any endeavor. Encourage children to believe in their abilities and to recognize the value they bring to the table. By fostering a sense of self-assurance, we empower our youth to navigate the complexities of the financial landscape with poise and resilience.
  1. Listen to Others: Effective communication is a two-way street that involves not only speaking but also actively listening. Teach children the importance of lending an ear to others, as every voice has the potential to impart valuable insights. By honing their listening skills, children cultivate a sense of empathy and discernment that serves them well in both personal and professional spheres.
  1. Put in the Hard Work: Success seldom comes without effort. Encourage children to embrace the virtue of hard work by involving them in household chores, encouraging academic diligence, or exploring part-time employment opportunities. By instilling a strong work ethic, we equip children with the tools they need to pursue their goals with diligence and determination.
  1. Budget, Save, & Invest: Introduce children to the concepts of budgeting, saving, and investing in a manner that is accessible and relatable. Emphasize the connection between hard work and financial resources, illustrating how responsible financial management enables individuals to achieve their aspirations. Encourage children to set aside a portion of their earnings for savings and explore the possibilities of investment, laying the groundwork for a secure financial future.

By integrating these principles into everyday interactions and activities, you can nurture a generation of financially literate individuals who are equipped to navigate the complexities of an ever-evolving economic landscape. Together, we can pave the way for a brighter, more prosperous future for generations to come.

Bryan Cassick, MBA, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Eight “Best/Worst” Wealth Strategies During the Coronavirus

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“The utility of living consists not in the length of days, but in the use of time.”

-Michel de Montaigne

For better or worse, many of us have had more time than usual to engage in new or different pursuits in 2020. Even if you’re as busy as ever, you may well be revisiting routines you have long taken for granted. Let’s cover eight of the most and least effective ways to spend your time shoring up your financial well-being in the time of the coronavirus. 

1. A Best Practice: Stay the Course 

Your best investment habits remain the same ones we’ve been advising all along. We build a low-cost, globally diversified investment portfolio with the money you’ve got earmarked for future spending. We structure it to represent your best shot at achieving your financial goals by maintaining an appropriate balance between risks and expected returns. We stick with it, in good times and bad.

2. A Top Time-Waster: Market-Timing and Stock-Picking

Why have stock markets been ratcheting upward during socioeconomic turmoil? Market theory provides several rational explanations. Mostly, market prices continuously reset according to “What’s next?” expectations, while the economy is all about “What’s now?” realities. If you’re trying to keep up with the market’s manic moves … stop. It is not a good use of your time.

3. A Best Practice: Revisit Your Rainy-Day Fund

How is your rainy-day fund doing? Right now, you may be realizing how helpful it’s been to have one, and/or how unnerving it is to not have enough. Use this top-of-mind time to establish a disciplined process for replenishing or adding to your rainy-day fund. Set up an “auto-payment” to yourself, such as a monthly direct deposit from your paycheck into your cash reserves. 

4. A Top Time-Waster: Stretching for Yield 

Instead of focusing on establishing adequate cash reserves, some investors try to shift their “safety net” positions to holdings that promise higher yields for similar levels of risk. Unfortunately, this strategy ignores the overwhelming evidence that risk and expected return are closely related. Stretching for extra yield out of your stable holdings inevitably renders them riskier than intended for their role. As personal finance columnist Jason Zweig observes in a recent exposé about one such yield-stretching fund, “Whenever you hear an investment pitch that talks up returns and downplays risks, just say no.”

5. A Best Practice: Evidence-Based Portfolio Management

When it comes to investing, we suggest reserving your energy for harnessing the evidence-based strategies most likely to deliver the returns you seek, while minimizing the risks involved. This is why we create a mix of stock and bond asset classes that makes sense for you; we periodically rebalance your prescribed mix (or “asset allocation”) to keep it on target; and/or we adjust your allocations as your goals change. We also ensure that we structure your portfolio for tax efficiency, and choose the ideal holdings for achieving all of the above. 

6. A Top Time-Waster: Playing the Market 

Some individuals have instead been pursuing “get rich quick” schemes with active bets and speculative ventures. The Wall Street Journal has reported on young, do-it-yourself investors exhibiting increased interest in opportunistic day-trading, and alternatives such as stock options and volatility markets. Evidence suggests you’re better off patiently participating in efficient markets as described above, rather than trying to “beat” them through risky, concentrated bets. Over time, playing the market is expected to be a losing strategy for the core of your wealth. 

7. A Best Practice: Plenty of Personalized Financial Planning

There is never a bad time to tend to your personal wealth, but it can be especially important – and comforting – when life has thrown you for a loop. Focus on strengthening your own financial well-being rather than fixating on the greater uncontrollable world around us. To name a few possibilities, we’ve continued to proactively assist clients this year with their portfolio management, retirement planning, tax-planning, stock options, business successions, estate plans and beneficiary designations, insurance coverage, college savings plans, and more. 

8. A Top Time-Waster: Fleeing the Market

On the flip side of younger investors “playing” the market, retirees may be tempted to abandon it altogether. This move carries its own risks. If you’ve planned to augment your retirement income with inflation-busting market returns, the best way to expect to earn them is to stick to your plan. What about getting out until the coast seems clear? Unfortunately, many of the market’s best returns come when we’re least expecting them. This year’s strong rallies amidst gloomy economic news illustrates the point well. Plus, selling stock positions early in retirement adds an extra sequence risk drag on your future expected returns. 

Could you use even more insights on how to effectively invest any extra time you may have these days? Please reach out to us any time. We’d be delighted to suggest additional best financial practices tailored to your particular circumstances. 

—

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

4 Money Blunders That Could Leave You Poorer

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Not to do listA “not-to-do” list for the new year & years to follow.

Provided by: Warren Street Wealth Advisors

   

How are your money habits? Are you getting ahead financially, or does it feel like you are running in place?

 

It may come down to behavior. Some financial behaviors promote wealth creation, while others lead to frustration. Certainly other factors come into play when determining a household’s financial situation, but behavior and attitudes toward money rank pretty high on the list.

 

How many households are focusing on the fundamentals? Late in 2014, the Denver-based National Endowment for Financial Education (NEFE) surveyed 2,000 adults from the 10 largest U.S. metro areas and found that 64% wanted to make at least one financial resolution for 2015. The top three financial goals for the new year: building retirement savings, setting a budget, and creating a plan to pay off debt.1

 

All well and good, but the respondents didn’t feel so good about their financial situations. About one-third of them said the quality of their financial life was “worse than they expected it to be.” In fact, 48% told NEFE they were living paycheck-to-paycheck and 63% reported facing a sudden and major expense last year.1

 

Fate and lackluster wage growth aside, good money habits might help to reduce those percentages in 2015. There are certain habits that tend to improve household finances, and other habits that tend to harm them. As a cautionary note for 2015, here is a “not-to-do” list – a list of key money blunders that could make you much poorer if repeated over time.

 

Money Blunder #1: Spend every dollar that comes through your hands. Maybe we should ban the phrase “disposable income.” Too many households are disposing of money that they could save or invest. Or, they are spending money that they don’t actually have (through credit cards).

 

You have to have creature comforts, and you can’t live on pocket change. Even so, you can vow to put aside a certain number of dollars per month to spend on something really important: YOU. That 24-hour sale where everything is 50% off? It probably isn’t a “once in a lifetime” event; for all you know, it may happen again next weekend. It is nothing special compared to your future.

 

Money Blunder #2: Pay others before you pay yourself. Our economy is consumer-driven and service-oriented. Every day brings us chances to take on additional consumer debt. That works against wealth. How many bills do you pay a month, and how much money is left when you are done? Less debt equals more money to pay yourself with – money that you can save or invest on behalf of your future and your dreams and priorities.

     

Money Blunder #3: Don’t save anything. Paying yourself first also means building an emergency fund and a strong cash position. With the middle class making very little economic progress in this generation (at least based on wages versus inflation), this may seem hard to accomplish. It may very well be, but it will be even harder to face an unexpected financial burden with minimal cash on hand.

 

The U.S. personal savings rate has averaged about 5% recently. Not great, but better than the low of 2.6% measured in 2007. Saving 5% of your disposable income may seem like a challenge, but the challenge is relative: the personal savings rate in China is 50%.2

 

Money Blunder #4: Invest impulsively. Buying what’s hot, chasing the return, investing in what you don’t fully understand – these are all variations of the same bad habit, which is investing emotionally and trying to time the market. The impulse is to “make money,” with too little attention paid to diversification, risk tolerance and other critical factors along the way. Money may be made, but it may not be retained.

 

Make 2015 the year of good money habits. You may be doing all the right things right now and if so, you may be making financial strides. If you find yourself doing things that are halting your financial progress, remember the old saying: change is good. A change in financial behavior may be rewarding.

     

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 – denverpost.com/smart/ci_27275294/financial-resolutions-2015-four-ways-help-yourself-keep [1/7/15]

2 – tennessean.com/story/money/2014/12/31/tips-getting-financially-fit/21119049/ [12/31/14]