Dawsyn Pouncil is on his way to becoming a millionaire at 16. And she’s only 18 months old.
It’s all thanks to her mother, Dominique Broadway, an award-winning financial planner, CEO and founder of Finances De Â· mys Â· tificed.
“We are trying to define [Dawsyn] to be financially successful in life, âBroadway says. “We really want her to feel financially empowered and never really have to worry about the money if she follows some of the things that we put in place.”
These items include a Roth IRA, a savings deposit account, and an investment deposit account. Between the two of them, Dawsyn raised just over $ 50,000, all of that money earning compound interest.
Here’s how Broadway is investing in its daughter’s future and how you can do the same, whether you have $ 5 or $ 50,000.
The story behind the $ 50,000 investment portfolio
At 18 months, Dawsyn’s investment portfolio looks like this:
She has a regular deposit savings account with a bank, where she earns interest on the cash deposit. She has an investment deposit account managed by the financial services company Acorns, with regular contributions every month. She also has a Roth IRA minor, to which she is eligible to contribute based on her âincomeâ as a brand ambassador for De Â· mys Â· tified Finances.
Dominique and her husband started Dawsyn’s investment portfolio right after he was born. Their initial contribution was approximately $ 4,500, followed by regular contributions of at least $ 2,000 per month, sometimes more. Most of the money is currently in Dawsyn’s investment accounts in various stocks and has reached $ 50,000 in 18 months.
You don’t need a lot of money to start investing. It’s best to start early with everything you’ve got and let your money grow over time with compound interest.
Because Dawsyn is so young, his investment portfolio can afford to be aggressive, with high risk, high return investments like stocks, international stocks, and aggressive mutual funds. If Dominique continues her regular contributions of $ 2,000 per month and is able to enjoy a similar rate of return of 10%, Dawsyn’s portfolio will be worth $ 1.1 million by the age of 16. resulting in a high rate of return, âsays Broadway.
When asked why she organized everything for her daughter, Broadway has a simple answer: âWhy not? Why wouldn’t you want to prepare your child for financial success? “
Broadway remembers how her grandfather started saving for her as soon as she received her Social Security number. He invested in Series EE bonds, a type of U.S. government savings bond whose value is guaranteed to at least double over its 20-year term, from the birth of Broadway until the time it went to university. Due to his investments, which started small but gradually increased as income allowed, Broadway completed his undergraduate degree without any debt.
“I realized how beneficial it was, how it made me be able to start investing in real estate and doing these other things earlier in life without having all of these extra financial pressures.” , explains Broadway. âWe want to do the same for our children, don’t we? We want them to be financially self-sufficient so that they don’t have to worry and stress about money, so that they can really go out and do whatever they’re supposed to be here for.
It’s also why Broadway built its business on helping people learn about financial literacy and build wealth. âI dedicate my life to helping people, especially a lot of people of color who don’t have access to this information, to access this information because it can be the thing that changes the financial situation for generations.â
How to create a stock portfolio for a child
Here are three things Dominique does to secure her daughter’s financial future and give her the knowledge she needs to be financially successful. And you can do the same, no matter how little or how much money you currently have.
1. Open these three accounts
Broadway recommends three types of accounts for your child.
âYou don’t have to do all three,â Broadway advises. âPick one based on what works for you, your financial situation, and the goals you have for your family and kids. “
Custodian savings account.
A savings account is the easiest to set up and perfect for anyone who isn’t ready to start investing yet but wants to put some money aside for their children, Broadway says. It can be opened at most banks or credit unions and will allow you to hold and manage your child’s money until they reach maturity.
Investment account on deposit.
Another option is a custody investment account, which is similar to a custody savings account in that an adult manages the account on behalf of a minor. âThe only difference is that in that depository investment account, you can actually start making investments for your child,â says Broadway. And the barrier to entry is lower than many people assume. âDon’t feel like you need a lot of money,â she adds. âYou can literally start investing for $ 5. “
529 education savings plan.
For parents with kids in college, a 529 Education Savings Plan is a great option to help save for your child’s education. With a 529 plan, you contribute a certain amount of money to invest in mutual funds or exchange traded funds, with the investment plan tailored to the target date your child will go to college. Some states also allow you to use these funds for private school tuition.
A major appeal of a 529 plan is the tax benefits, which can include federal and state tax deductions and tax credits. Different states offer different 529 plans, so be sure to check your state’s plan details on the official College Savings Plans Network website. Some states’ 529 plans don’t even require the owner or beneficiary to be a resident.
2. Start investing early
âI tell people all the time that the sooner you start saving, the less you have to save because of the power of compound interest,â says Broadway. âSo start small. Don’t feel like you have to have millions, billions and billions of dollars. $ 10 a week, $ 10 a month, do something.
You can sign up for a high yield savings account with no minimum deposit and start earning interest immediately on the money you have available. You can also open an investment account to make your money grow faster. âYou could start investing for yourself or for your kids for as little as $ 5,â says Broadway.
If you don’t have kids right now but want to build a savings portfolio for future kids, you have options as well. Although you cannot open a savings or investment account in your child’s name until they have a social security number, you can open a dedicated savings account in your name for the purpose of put that money aside for future children.
You can also open a 529 plan for another child, such as a niece or nephew, Broadway says. If you later have children, you can change the beneficiary.
Whichever way you choose to invest, âdon’t delay or feel like you don’t have enough money,â Broadway says. âJust start with what you can. “
3. Talk to your kids about money and let them be part of the process.
âMy family was always talking about money, like, all the time,â Broadway says. âNot in a negative way. And always in a really optimistic and positive way and just showing me that money is part of our everyday life.
She plans to do the same with her daughter. âHaving these conversations early on is important,â she says. âWe want finances and investing to be everyday conversation topics in our home. “
Another thing she plans to do as her daughter gets older is to let her be part of the investment process. âOne of the things we plan to do with our daughter is to make sure that she participates in these investments,â says Broadway. âWhile we are selecting stocks, [we] let her choose the actions.
For parents looking for ways to start a conversation about investing with their kids, Broadway recommends looking to businesses their kids already use and love. âThis will be the best way to get your kids interested in potentially investing and owning,â she says.
âI think that as parents we should talk more about property with our children,â she adds.
There is power in being a partial owner of a business instead of just being a consumer, Broadway believes, and she plans to teach her daughter that as soon as possible.