By paying a child a reasonable wage for legitimate work (e.g., social media modeling), a business can take a tax deduction. The child owes no federal tax up to the standard deduction, and this income can then be used to fund a powerful, tax-free custodial Roth IRA.
The extreme time horizon for a child's investment makes early contributions to a tax-advantaged account exceptionally powerful. Due to compounding, a one-time maximum contribution early in a child's life can become a million-dollar, tax-free nest egg by retirement without any further investment.
While whole life insurance offers a cash value component, its premiums are 5-15 times higher than term insurance for the same death benefit. Most families can build more wealth by opting for cheaper term coverage and investing the premium difference in the stock market for higher returns.
When receiving a windfall (e.g., bonus, inheritance), the IRS allows you to contribute five years' worth of funds to a 529 plan at once without triggering gift tax. This strategy maximizes the time the money is in the market, making it more powerful than annual or monthly contributions.