This week, The Simple Dollar is conducting a detailed review of Kevin McKinley’s Make Your Kid A Millionaire. This title focuses on the role parents play in building a net worth for their child, both financially and psychologically. Does this book provide some interesting insights, or is it merely a repeat of the power of compound interest? This week, we aim to find out.
As your child grows older, the book begins to assume that you’ve done a few fundamental things, such as plan for an unexpected disaster as well as begin a savings program in a 529. What else can you do to help ensure a great future for your child? The middle section of the book addresses this.
The strongest suggestion given is to invest in your own Roth IRA. Since this money is all after taxes and you can begin withdrawing at age 59 1/2, it’s a great way to channel money to your future self without worrying about taxation. This serves two great benefits in terms of your child: one, it ensures that they will have very little expense when it comes time to look at assisted living facilities and other late-life needs for you, and two, it gives you a source of money that you have many options for distributing. You can take the money out steadily and spend it on your children or grandchildren while you’re alive, or, if you’re in great financial shape, you can hold onto that money and pass the Roth IRA onto your descendents upon your death. Either way, a Roth IRA is a great way to keep control over your money while still allowing you to be able to help your children later in life.
The book also suggests investing in common stocks and annuities for the future, but it is quite clear that there are better investment options than these, so there are portions of the middle of the book that feel much like supplemental material.
Another disappointment in this section of the book is the continuing references to the value of this period in a child’s life to educate them about money, but the book offers no real advice on the subject. I found this particularly disheartening because of my belief that a good education about life is the most valuable gift you can give your child, and an education about money is a vital component.
McKinley’s book does a very good job of explaining the mechanics of how you can make your child a millionaire by giving the child the money, but it does a poor job of explaining how you can teach your child to understand the real value of this gift, that money in the bank is freedom, not just the key to more stuff. This is the big sour note for this book.
Tomorrow, we’ll go through what this book has to say about your financial arrangements with adult children.
You can jump quickly to the other parts of this review of Make Your Kid A Millionaire using these links:
Prebirth Through 6 Years
Ages Seven to Twelve
Age Thirteen to Adulthood
Buy or Don’t Buy?
Make Your Kid A Millionaire is the fourth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.