Money Rehab with Nicole Lapin
4 Secrets for Making Your Kids Rich with "Law Mother" Pamela Maass Garrett
Wed, 26 Feb 2025
For the rest of the week, Money Rehab will be hosted by Pamela Maass Garrett, aka Law Mother, attorney and money expert. Today, Pamela reveals the four powerful strategies she uses to build lasting wealth for her kids—and how you can apply them to secure a strong financial future for the children in your life. Pamela Maass Garrett, aka Law Mother, is an attorney and money expert helping you grow and protect your wealth through her bestselling book Legally Ever After and her upcoming Wealthy Ever After book and app. Find Pam’s freebies here: https://www.lawmotherco.com/moneyrehab Follow Pam here: https://www.instagram.com/lawmotherco/ The content in this episode is for entertainment purposes only, please consult an advisor before making any financial or investment decisions. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC. Treasury accounts offering 6 months T-Bills are offered by Jiko Securities, Inc.,member FINRA & SIPC. Securities in your account are protected up to $500,000. For details: www.sipc.org. Banking services and the Bank Accounts are provided by Jiko Bank, a division of Mid- Central National Bank. For U.S. Investments in T-bills: Not FDIC Insured; No Bank Guarantee; May Lose Value. Treasuries risk disclosures, see https://jiko.io/docs/treasuries_risk_disclosure.pdf. See public.com/#disclosures-main.
Chapter 1: Why is Pamela Maass Garrett hosting Money Rehab this week?
Hi, Money Rehabbers. It's Pamela Mosquera. You may know me as Law Mother. I'm going to be guest hosting this week while Nicole is on maternity leave. This week, I'm here to tell you about what I do best, how to protect and grow wealth. You might remember me from my guest spot on Money Rehab. I was one of Nicole's last recordings before she had her daughter.
And in that episode, I spilled all the secrets on how to protect your assets. But this week, we're going to go even deeper into the crossroads of wealth and the law. And I'm going to bring you my insights from my work, plus real raw conversations with thought leaders and celebrities who've lived through all kinds of legal and financial storms like divorce.
Now, Nicole wanted me to have this conversation with you because after losing her home in the LA fires, she knows how crucial it is to hope for the best, but plan for the worst. And that's exactly what we're going to do this week. But first, I wanted to kick off my episode this week solo so I can tell you a little bit more about me and why I do the work that I do.
Chapter 2: What are the four secrets to making kids rich?
But this episode isn't all about me. It's actually mostly about you and your kids. Today, I'm going to be sharing four secrets to make the kids in your life rich, even if you can only start small. And if you don't have kids, stick around anyway. This could be for your nephew, goddad, or your bestie with a kid on the way, or even your future self. So let's rewind.
I didn't grow up with a trust fund. My mom was a teacher, my dad an engineer, and I was taught you have to work hard for money. In high school, I took a law class, and I also watched way too much Law & Order. And in high school, I told my family I wanted to be a lawyer, and they weren't thrilled. I was hooked, but they had had bad experiences with lawyers. They didn't trust them.
And my dad encouraged me, though. He suggested, though, I follow in his footsteps and study engineering first and then go to law school. So that's what I did. law. So after law school, I started my career as a prosecutor. And that's where I saw what happens when families don't have a plan.
I handled cases where parents died suddenly, leaving their kids caught in court battles, or worse, their kids ending up in foster care. And I saw siblings fight over money, children losing everything, families torn apart simply because no one had put the right protections in place. And that's when it really hit me. Most people don't plan because they don't know how.
And the wealthy use legal tools to protect their families and assets. And these same tools are available to everyone if they know where to start. So the more I learned about the law, the more I understood the tools the rich use to protect their assets are actually available to everyone. And I started using them myself with my clients to build generational wealth.
And now I want to share them with you listening. So most parents think they need thousands of dollars to invest for their kids. But what if I told you that you only need $100 a month, and that's less than most people spend on coffee, to turn your kids into millionaires 100% tax-free? So let's break it down, and I want to start with the problem first.
Every parent wants their kids to have a strong financial future, but most feel overwhelmed. Many assume they need large amounts of money to start investing, so they never do anything. And the truth is, even small investments, if done the right way, can turn into millions over time. And if you put the money in the right accounts, your kids can keep every penny tax-free.
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Chapter 3: How can a $100 monthly investment grow into millions?
So for example, a mom friend of mine called me recently and said, I want to invest for my kids, but I just don't have thousands of dollars laying around. And she assumed investing was only for the wealthy, so she just never got started. I asked her, can you afford $100 a month? And she said she could.
What she didn't realize is that if she had started investing $100 a month into the right account, it could turn over to $1,000,000. When I showed her the math, she was shocked. The biggest mistake parents make, thinking they need a lot of money to start investing. And the truth is, time matters more than the amount you invest.
The earlier you start, the more you can take advantage of compound interest, where your money makes money on top of money. And if you wait, you lose hundreds of thousands of dollars in potential growth. So that's a problem. Let's dive into the solutions and go into secrets to make your kids rich. So secret number one is a brokerage account.
And a brokerage account allows you to invest in stocks and index funds for your child while they are still young. And the best part is you can open them in five minutes on Public, Merrill, Fidelity, Vanguard. There are so many options. But opening a brokerage account is just the first step. You need to actually make investments.
Now, I personally invest in low-cost index funds like VOO, and VOO tracks that S&P 500. This means your child's money is invested in the 500 largest companies in America. So what exactly is a low-cost index fund? It's a diversified investment that spreads money across hundreds of stocks. And it has low fees, meaning more of your money stays invested instead of going to fund managers.
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Chapter 4: What is the first secret to building wealth for kids?
Now, historically, the S&P 500 has returned about 8% to 10% per year, which is way more than a savings account. The average savings account in the US right now is returning less than 1%. So let me give you an example. If you invest $100 per month from birth, at the time your child turns 21, that could be over $80,000.
And if you don't contribute any more and they just leave it invested, at retirement, it will be worth over $2 million. So should you set up a custodial brokerage account or a regular brokerage account? And the difference here is a custodial brokerage account, you're opening with your child's social security number, it's their money.
A brokerage account in your name is actually under your social security number. So this is where people often get blindsided. And I wanna give you an example. A client I worked with a few years ago got blindsided because she set up custodial brokerage accounts for her boys. She put a lot of money in it. So at the time she called me, it was worth over $300,000.
And she didn't realize her kids were going to have full access at age 18. And understandably, her sons didn't have the life lessons to really know how to responsibly use that money. So that is the downside of custodial brokerage accounts. It is your child's money and it has an age of majority provision, which means they have full control at age 18.
So this is why for many, it's better to just set up a brokerage account in your own social social security number, and just earmark that money for your kids. Now, the downside of this is if you end up selling stocks, this will go on your tax return, not your children's. So it will be at a higher tax rate. But for many people, that trade-off is worth it.
They want to keep control of that and give it to their kids when they feel like their kids are financially ready. Secret number two is a 529 plan, and this is the best way to save for college, and it has huge tax benefits. So what exactly is a 529 plan?
Well, it's a college savings vehicle that allows you to invest money tax-free as long as the funds are used for educational expenses, with some exceptions I'll get to here in a moment. So why is it great? Well, the money grows tax-free, and that's a huge advantage over regular savings accounts and traditional brokerage accounts.
And you can use it for college, trade schools, and in some states, private K through 12 tuition. Now, some states also offer a tax deduction for the contributions you put in. And the biggest question I get is, well, what if my kids actually don't go to college? And in that case, you can roll it over to other family members and even yourself.
And thanks to recent legal changes, you can even roll $35,000 into a Roth IRA retirement account. So for example, if you invest 100 per month from birth, your child could have 50 to 60,000 by the time they turn 18. And they can also leave it in there. So this is best for parents who are sure they want to save for college or a trade school. Let's get into secret number three, a custodial Roth IRA.
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