How to Make Your Child Absurdly Wealthy for Absurdly Little

Tyler Gardner (0:00)

Open the account, automate contributions, invest in growth and leave it alone. Eerily similar to what we talk about doing with our own accounts. Do that and your kid will have millions of dollars by the time they retire. Not because you paid for everything, but because you gave them 20 extra years of compounding that they can never get back.

Hello friends, this is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance and investing. So let's get started and get you one step closer to where you need to be. Welcome back to another episode of Your Money Guide on the Side. Today we're revisiting one of the most popular episodes we've ever done. How to help your kid become a millionaire, or a multi-multi-millionaire, for very little? Last year's episode on this topic was one of the most listened to in 2025, and the number one question I got wasn't, is this real? Or are you exaggerating? It was, wait a minute, how big is that final number? And I get it. Because when you hear that contributing $3,000 a year for a decade can turn into $3.6 million by the time your kid is 65, it kind of sounds like financial clickbait. But I assure you, it's not. I don't play that game. It's basic math. It's compounding over 55 years. That's 55 years of growth you can't replicate if you wait until they're 20 to start. And when we tend to think about investing in compound interest, we also usually think about our own timeline. If you're 30, you've got 35 years until retirement. If you're 40, you've got 25 But if you start investing for your kid at birth, they've got 65 years. That's 20 to 30 extra years of compounding you will never, ever get back. And yet, parents endlessly stress about how to help their kids financially. Saving for weddings, down payments, grad school, the first house, and all of that is fine. But here's what none of us talk about as much as we should. $3,000 a year invested from birth to 18 will do more for your kid than gifting them $50,000 at age 30, and it's not even close. So today, we're going to walk through three different ways to invest for your kid. Three different account types, three different strategies, and the real numbers behind each one. We'll talk about what happens if you fund it until they're 18 What happens if they keep contributing after that, and most importantly, the tax implications of each approach. We'll cover the UGMA, the account that requires no earned income. We'll cover the custodial Roth IRA, the account that requires your kid to have a job but gives you 100% tax-free growth forever. And we'll cover a strategy that for some reason nobody talks about. Just investing in your own taxable brokerage account and letting them inherit it with a step up in basis, completely tax-free, while you maintain control the entire time. And then finally, we'll wrap up and talk about why I'm not 100% sold on the 529 The account everyone recommends, but that might not actually be the best option for many families. And, before we jump in, a familiar ask. If this show has been even remotely helpful to you over the past few weeks, or months, if it's made you feel even one ounce more confident in your financial decisions, please consider leaving a review on Apple Podcasts or Spotify. It helps other people find the show, and frankly, it helps me feel like I'm contributing something useful to the world instead of just adding to the global oversupply of mediocre content. And to the 2,000 of you who left a review in the first year of this show, I cannot tell you how much I appreciate you. All right, let's get started. Part 1, the 3 strategies we could use. Section 1A. Bear with me. The UGMA UTMA. This is the No Earned Income Required Account. Let's start with the UGMA, which stands for Uniform Gifts to Minors Act. There's also the UTMA, Uniform Transfers to Minors Act, which is basically the same thing with slightly broader rules depending on your state. But for simplicity, I'm just going to call it a UGMA. And if you live in one of the states that uses UTMA, congratulations, you get to transfer your kid a slightly wider range of assets. I'm sure you're thrilled. Here's what a UGMA actually is. It's a Custodial Brokerage Account set up for minors. You open it in your kid's name, you control it until they turn 18 or 21 depending on your state, and then it becomes theirs. Fully theirs. Meaning, they can do whatever they want with it, including, and I say this with love, potentially making terrible decisions. But we're going to get to that later. Here's why it's useful. The UGMA is the most flexible account that I'm going to talk about today. Your kid doesn't need a job. They don't need earned income. They don't need to do anything except exist. You can open this account the day they're born, and start contributing immediately. No contribution limits. You could put in $3,000 a year, $10,000 a year, $50,000 a year if you want, though at some point, gift tax rules will kick in, and we'll also get to that. And you can invest in anything. Stocks, bonds, ETFs, mutual funds, whatever you want. This is the account for parents who want to start early, who want flexibility, and whose kid doesn't have a W-2 from their little lemonade stand. Here are some real numbers to consider. Let's say you contribute $3,000 a year from the time your kid is 5 years old until they turn 18 That's 14 years of contributions. Total amount you've invested, $42,000.