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Tài Khoản Đầu Tư Cho Trẻ Em Dưới 18 | Custodial Account (UGMA/UTMA) | Cuộc Sống Mỹ | Chứng Khoán Mỹ - YouTube
Channel: Huyen Nguyen
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In this video I will guide you how to create investment accounts for children under 18 years old
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And how to make your kids become a millionaire easily
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Hello everyone. Merry Christmas.
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Welcome everyone to my channel
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If this is your first time watching my video
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In this channel
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I'll share my experiences about finance, investing, and how to save money
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If this is what you are interested in, please consider subscribing
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Every year when it comes to Christmas
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What gifts do you often give to your children?
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This year
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Instead of giving gifts, giving toys, or giving money
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I will give my nephew and niece a more meaningful gift
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That is an investment account
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When I first started to learn about investment and the power of compounding interest
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I wish I knew about investing earlier
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If someone taught me about investing when I was 18 or 20 years old
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It's going to be different now
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If my parents planned and invested for me earlier
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I would have a lot of money now
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Let me do an example
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I was born in 1984
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The annual average return of the S&P500 from 1984 to 2020 is about 11%
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If my parents invested $10,000 in the S&P500 when I was first born
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Only once, $10,000 from the year I was born
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and leave it there until now
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I will have about $486,341
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You can see, the market goes up and down each year
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But if we invest long term
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the value of this package will increase over time
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Time is a very important factor in the compound interest formula
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and time is what children have
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so today
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I will open an investment account for my nephew and niece
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and start investing for them
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so that their way to their destination is not as long and arduous as mine
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There are about 3 different types of investment accounts for children
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The first type is the Roth IRA
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The second type is 529
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And the third is the Custodial Account
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For Roth IRA accounts
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Earnings on the account will be tax free
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but with 2 conditions
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1) The child must have earned income
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2) The money in this account cannot be withdrawn until the child is 59.5 years old
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Currently, I cannot open a Roth IRA for my nephew and niece because they don't work yet
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When they are 15 or 16 years old, and getting a job
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I'll make them open a Roth IRA
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The second account is 529
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Earnings in this account will also be tax free
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But with 1 condition is the money in the account 529
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must be used for educational expenses ONLY.
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I have considered this account
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But what if when my nephew and niece grow up, they don't want to go to college?
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Each person will have a different will
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I can force the child to go to school
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But I can't force him to learn
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So I will not open 529 account for my nephew and niece
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I decided to open a custodial account for them
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The custodial account is the same as a taxable brokerage account
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This account will be used for children under the age of 18
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Please note the following factors when opening a custodial account for your child
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Firstly, custodial account is the child's account, under the child's name
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You are only the account manager when they are under 18 years old
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Even though you are the ones who contribute money into that account
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But when the money is in that account, it does not belong to you anymore
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you can buy/sell stocks in the account, invest in the account
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But that money is owned by your child
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You are not allowed to use the money in that account
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If you use the money in that account, and the child finds out, he can sue you
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The amount you can contribute to the custodial account each year will not be limited
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will be counted as gift money for your child
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but every year if you give someone more than $15,000
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you must report to the IRS
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So for the best, we shouldn't contribute more than $15,000 per year
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Any income from this account
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will also be taxed at the child's tax rate
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such as the dividends or the capital gains we get when selling stocks
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The first $1050 will be tax free
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The next $1050 will be taxed at the child's tax rate
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and earnings over $2100 will be taxed at the parent's rate
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When the child reaches the age of majority specified by the state
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control of the account must be transferred to them
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The age of majority varies by state
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but is generally between 18 and 25
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The money in this account will count as the child's assets
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and will likely affect the child's Financial Aid benefits in the future
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What is Financial Aid?
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Financial aid is money to help pay for college or career school
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from the government to help students from difficult backgrounds
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Please note
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Not everyone is qualified for Financial Aid
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only students with difficult backgrounds
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will receive Financial Aid
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When we first came to the U.S
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Our parents worked low wages, and our families had many children
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so when we went to college
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Most of us had FInancial Aid benefits
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But it's going to be different for our children
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Our income now may be higher
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and we don't have that many children
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So the chances that our children have Financial Aid are very low
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so please should consider this
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Now I will guide you how to open an account in Fidelity
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The reason I chose Fidelity to open an account for my nephew and niece
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is because Fidelity has no minimum investment
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That means I can start investing with a very low capital
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Once you are on the Fidelity website, then click here
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And you scroll down
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Click here
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In this section, click on "Saving for Education"
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Right now the "Saving for Education" part
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choose Custodial Account
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Right here on this page
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They will ask if you are already a Fidelity's customer
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If you are already a Fidelity's customer then click Yes and enter your information to log in
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If you do not have an account with Fidelity yet, then click No
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And you have to create an account for you first
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Then you will create an account for your child
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I already have a Fidelity account, I will log in it
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After you have logged in already
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Then in the section right here
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You will fill in your child's information
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first name, middle name, last name
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And right the part where they ask for that social security number
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Then you click Yes and you enter the child's social security number.
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Date of birth
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After that, if the child is US citizen or not, you should choose the correct one
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Here, you choose the state where the child lives
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And below, please remember to check your address to see if it is correct.
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And you click Next to complete this application
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After your child is 18 years old and you want to transfer the account to him
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then you click here
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And click on Account Features
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And click here
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Then choose this one
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Then you scroll down
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Click here
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And complete the transfer procedure
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Here is my investment plan in these 2 accounts
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This Christmas I will give my nephew and niece $100 each
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Then, I will automatically deposit $20/month on each account
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Holidays, Tet can be added
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So each year, I invest in each account about $300
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I will invest 1/2 of the capital in FZROX
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and half of the remaining capital in FTEC
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Why did I choose these 2 funds?
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First, FZROX is the package that contains the US market
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It is also quite similar to the S&P 500
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The reason I chose this package instead of the S&P 500
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That's because FZROX has no management fees (expense ratio)
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Second, the FTEC is a package in the technology sector
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The US stock market is divided into 11 sectors
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And the technology sector is my favorite because of its rapid growth
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So I choose to invest 1/2 of the capital in it
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I have made videos about these 2 funds already
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I will leave the link up here, please check it out
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FZROX has the same growth as the S&P500 package
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And FTEC, in the last 10 years, the growth is quite fast
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But we don't know the future growth
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In the past, it grew strongly, but we can't predict the growth in the future
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So I'm just using an average of 10%
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So for example, every year, I invest $300 in my nephew's and niece's accounts
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With an interest rate of 10% per year
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then after 10 years, they will have about $6000 each
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Please note that the capital is very little
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Each month I only contribute $20 to each account
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Just imagine
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If you invest $100 in your child's account every month
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With an interest rate of 10% per year, after 10 years they will have about $24k
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After 20 years, they will have about $83k
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After 30 years, they will have about $238k
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After 40 years, they will have about $638k
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After 50 years, they will have about $1.6 million
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Just imagine, from the day you gave birth to the child
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Every month you contribute $100 to the S&P500
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After 50 years, your child will have $1.6 million.
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The purpose when i open custodial accounts for my nephew and niece
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in addition to saving money for them
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There is also another very important factor
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That is I want to teach them how to manage personal finances, and how to invest
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The mindset of a person is very important
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If a child grows up has a good mindset about money and investment
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Then in the future, they will make very wise decisions
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But school does not teach them about personal finances and investing
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they don't teach you about the Roth IRA in school
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They don't teach you about Index Funds in school
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They don't teach you about investing in school
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They don't teach you about personal finance in school
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They only teach you how to be a good employee
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You have to believe me
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I went to high school here, I went to college here, I went to graduate school here
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Currently I am a college math professor
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And I dare to confirm with you one thing that
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In school curriculum, they don't teach personal finance
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Every semester, I have to set aside at least 1 to 2 days
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To teach your students about the Roth IRAs, about the Index Funds
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investment and personal finance
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Once the school didn't teach your kids these things
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Then it is your responsibility to teach them
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Hopefully this video will be an inspiration for you to get started
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to teach your children or about personal finance.
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Thank you for watching. Don't forget to like and subscribe. Bye.
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