Rich Habits Podcast - Q&A: $350K Salary, Paying Rent Upfront, and Our Favorite Books

Episode Date: December 7, 2023

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions! This week's questions are specifically from Instagram. If you have questions to ask us, send us an email at "[e-mail]," or send them on Instagram @richhabitspodcast!---Be sure to check out Public's new ⁠High Yield Cash Account paying 5.1% APY.⁠ This is higher than anything else on the market and is FDIC insured up to $5M. ---Earn 5.1% APY using a Public HYCA, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Opt-in and share your email, ⁠⁠⁠⁠click here!⁠⁠⁠⁠Learn more about our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠4-module video course!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our FREE Budget Template, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Robert: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/RobertJCroak⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Austin: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/austinhankwitz⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Contact: [e-mail] ---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

Hey everyone and welcome back to the Rich Habits podcast, a top five business podcast on Spotify, question and answer edition. Myself and Robert might sound a little bit different, hopefully a little bit better, because we have upgraded our microphone set up and the vibes are high. We're feeling good about this, y'all. Yes, we are so excited and I can't believe how good this thing sounds. I'm going to be able to read your souls from here on out. So I'm going to make sure to give you guys the best information possible,

as Austin and I continue to grow the Rich Habits podcast. So with that being said, let's kick off this Q&A episode with our first question from the FAMShear G. FAMSher G asks, what are some of your favorite financial literacy books? I recently found your podcast and now I'm hooked on financial literacy, which is awesome. So glad you got to find us. So I would say my two favorite financial literacy books for anyone on sort of the spectrum of beginner to expert, the beginner side of the equation is the little book of common sense investing by John C. Bogle. He's the guy who founded Vanguard and we all know what Vanguard is. But it's a great book that breaks down, you know, dividends, index funds, all the easy stuff so you can go from I know nothing about retirement

long-term investing to wait a second. I feel pretty good about this. I can, I can start, you know, moving in the right direction. So that's the first one. The second book that I really like is called 100 Baggers by Christopher Mayer. And that's for like the stock nerd. If you're a stock nerd like me and you like to learn about the profits and the gross margins and like the different ratios and things like that, 100 baggers is a really great book that's going to introduce you to some of those concepts. And a couple that I'd like to add is the richest man in Babylon. I know Austin, you like that one as well. I just really like it for kind of the rudimentary simplicity that the book provides, but it gives you this mindset of understanding money, finance, and just really how to do it in

your life in a way that matters so you can kind of internalize and understand your direction with finances. And then I would say the other ones since we've already discussed thinking grow rich would be the millionaire next door. I love that one because we live in a life right now in a society where everything is kind of based on this comparison based lifestyle. And I think that that book, although written many years ago, really kind of touches on what we deal with today in modern society through social media. And I love that because it teaches people that to live within your means is very, very important to automate your investing, but also to understand not to try and keep up with the Joneses. It's not all about what you think your next door has. And just really

understanding that. I'm getting ready to do a TikTok on this to get people to really understand that most of the people out there with the flashy cars and the house that, you know, is the best house on the block and all of that generally are living beyond their means and their debt to income ratios are very high. And so it's a slippery, slippery slope for many people in America and around the world. And so those are the two books that I think can really help move the needle the most for people. Really good answer, Robert. So our next question comes from TJ. T.J. says, I have $30,000 in student loan debt with interest rates ranging from three and a half percent to five percent. Should I pay down my student loans or save for a down to payment on a house. Which one should I prioritize? TJ, I would say neither. I would keep paying those student

loans, pay the minimum payments at that three to five percent interest, leave it B. Because at the end of the day, right now the markets are doing very, very well. If you take the S&P, I think at 18 or 19 percent this year, QQQ, the NASDAQ is at like 47 percent return for the year. So you really want that positive arbitrage going in your favor rather than into paying down these low interest debts. And then secondarily, I wouldn't get the house first, unless you're going to house hack, I wouldn't go buy a primary home. So if you really want to buy a piece of property, I would take that money that you're talking about, that you save for that down payment. I would go find a duplex, a triplex or a quadplex. I would use the new Fannie Mae loan, the 5% loan. And what that loan is, there is no real name for it,

surprisingly, is you can get a 5% loan, 5% down, up to $1.3 million, up to four doors, and the criteria for approval is much lower than many other conventional loans. So I would take the money, get the 5% mortgage, 5% down mortgage through Fannie Mae, buy a duplex quadplex, something like that, and house hack for that first one or two years. Then by that time, you should be ready to then go buy the primary home if you're ready or house hack again. But you're going to find that you're going to have the capital appreciation, you're going to have the depreciation, and you're going to have the tenants paying your mortgage. So it's the best first step for you moving forward on your financial journey by buying a property that cash flows rather than a primary home that's just going

to tie up that down payment and your money every single month. That's what I would do. That is a really, really good answer, Robert. Now, something I want to double click on, you mentioned house hacking a couple times here. For the new listeners that might not know what house hacking is. Can you kind of walk through maybe with even some rough numbers of some rough, you know, ideas of mortgages and rents, collected, stuff like that? What house hacking is and why it's so important for people like TJ who are trying to buy their first house, why we recommend to not go out and buy the primary home, but instead to go house hack. Just kind of give us the play by play there. It would be great. Sure. I would love to. I think it's one of the most important first steps

for any person looking to build wealth and that is interested in real estate. So the simplest form of house hacking is. Instead of buying a single family home, let's say you go buy a $300,000 property and you've got to put 20% down, so you've got $60,000 that's going to be tied up. Instead of doing that, go find yourself a duplex. And it could be in the same price range. It might be a little more. But the key to it is you're going to be able to use one of these loan programs so you're taking less money out of pocket out of the gate. And let's say in that area you buy the duplex. And it's a duplex with two, two bedroom, two bath units. You're going to rent out the one unit.

And let's say that that unit probably rents for $1,400 a month, maybe $1,800 a month. So that right there is going to eat away at, let's say, 70 to 80 percent of your mortgage and your PMI per month, leaving you with a much smaller chunk that you have to cover. So not only is that person paying most of your mortgage, but also you get to enjoy the depreciation, the capital appreciation. and the fact that you're spending so much less per month for your living situation. So that's the simplest way to look at house hacking is buying multiple doors, living in one unit and letting the rest of the units pay the mortgage and the expenses. And to also now fast forward what that might look like over three, five, seven years, you know, Robert, after you live in this house for a couple of years,

you've done the house hacking thing and you're like, wait a second, And maybe I'm ready to go buy that primary house, start a family, move in that in different direction. You now have two units, two doors, essentially, to your point that you ran out for $1,500, $1,800 per month. Wow, that's $3,600 that you now have in rental income. Now, sure, you still have to pay out the mortgage and the PMI and stuff like that. But that is now cash flow into your pocket that you wouldn't have had before if, to Robert's

point, you just went out and bought the primary home and kind of did the normal. everyday thing, right? Yeah, one of my favorite tips, and I did a TikTok on this a while back and it did really well, is telling people that are on the verge of getting married, say you just got engaged and your wedding's going to be a year, year and a half out is for each person in this relationship to go use, say, an FHA loan or one of these 5% Fannie Mae loans and go buy their own properties. So let's say the rules state you have to live in the property for one year and you haven't moved in yet together as a couple because you're not married. If you each go buy a duplex,

triplex, or fourplex, and then you take the benefits and you double that because you're each owning this property, you're each getting the mortgage paid for. Then imagine that a year later, you move in together and you buy your primary home. Then you have four, six, eight doors, all cash flowing for you. Then your primary home is essentially going to be free for you monthly because you've laid the seed in the foundation to creating this future wealth. Most people rush right in as soon as they start making money or as soon as they're going to get married, they rush right in and buy a primary home. And then unfortunately, once you combine forces and you're married, the banks and the government

look at you as one entity. So you lose that right to explore and take advantage of some of these strategies. So, TJ, I know that was a super long-winded answer here for you, but I think it's really important that we dig deep into these specific answers because there's a lot of people who are probably in the same situation, right? They might have some student loans. They might have some, you know, low interest debt hanging around. And they're thinking, well, how do I think about the debt in pair with buying real estate? And so hopefully this house hacking example inspires some of you to go out and purchase a duplex or a triplex or even a quadplex. Really good question, T.J. So our next question

comes from Jessica G. Jessica says, my husband and I are 35 and we are both high-income W-2 earners. Together, we make around $350,000 per year. We've both been maxing out our 401ks for a couple years, and as you all have said a million times, we are not performing as well as the market. It's starting to get frustrating. Each of us have around $250,000 in our 401ks, so about $500,000 total. The question is, should we roll over this money out of our 401ks into traditional IRAs where we have more autonomy over our investments. All right, Jessica, so really good question. I wouldn't be so hasty if you said like, yeah, for the last like, you know, year or two, we've been underperforming the market because like we kind of had some weird markets, right?

2022 was a massive sell-off year. 2023 was a big rebound, really dominated by the Magnificent 7 and the S&P 500, right? So even if you were in some of these different maybe index funds, I could understand if there was some underperformance. But you said that you've been underperforming, for years now. And that kind of scares me. The only other thing before I give you my answer, and this sort of goes back to our interview with iShares, and it's, you know, risk-adjusted returns and sort of what that looks like for every individual. But you guys are 35 years old. And if it were me, I would want to be as invested and, you know, aggressively moving up and down with the markets as possible. And so just knowing that you haven't seen those awesome ups and

obviously the downs as well is sort of alarming. So what would be? I do? I definitely would consider rolling over the existing 401k into a traditional IRA so there is no taxable events. So you can have the autonomy that it seems like you're looking for, Jessica, over your retirement accounts. Obviously, we talk about the index funds, V-O-O, VG-T, VTI, QQQ, SPI, things of that nature. However, I would imagine as high-income earners, you all are probably excited about maxing out the 401k every year, considering it's going to save you combined about $10,000 to $12,000 in taxes on an annualized basis. So I wonder if there's like a happy medium where maybe you can roll over into the traditional IRA and have autonomy of your

existing half a million dollars while also investing new money into the 401k, allowing you to bring down your taxable income on an annualized basis. That might also help. But again, it's like how much are you underperforming in relation to, you know, there's so many different ways to think about this. So, right? Robert, do you have a perspective? Yeah, without us having all of the information, I think you're on the right track, but I'm going to take a different approach. I don't hear the Roth IRA mentioned anywhere in here.

And so I'm a little confused on why we wouldn't integrate the Roth IRA into this situation and then maybe look down the road to get into that backdoor Roth IRA. Because right now, yes, the tax savings are there by maxing out the 401K, but then like you touched on, there's just so much, so much gains that are being left on the table here with this underperformance. So I think we need to just really look at what can be the best strategy for high earners like this in this situation. And without more information, it's tough to really call out our thoughts as far as the best way to do this. But I think you covered it pretty well of, you know, what to do. I personally would probably back off on the 401k a little bit,

get the Roth IRAs up and running and get them maxed out because then you have autonomy and you can get much higher gains than you would in the 401k. That's probably where I'd start just to get on a better track and not leave so much money on the table. And I think the last thing I'd want to suggest to Jessica here is go to your HR department and be like, hey, listen, I'm underperforming the markets in my 401K. Maybe I don't have full information as to what I'm able to invest in. Here's the options you gave me. They've all underperformed the markets, right? Like, what should we do? Maybe there's a way that you could even, maybe not cause an uproar at your employer, right? But like, if enough of y'all get together and say, listen, you guys are giving us shitty options, maybe that would be the kick in the

butt for your employer to say, okay, well, let's change vendors, right? Let's go away from X vendor and instead try Y vendor because they have better options for our employees, right? So maybe that's also a way to think about this as well. But regardless, really good question, Jessica. And I hope we added enough color here. I know we only have limited information, but best of luck. So our next question comes from Tim S. Tim says, I've been looking into diversifying my portfolio with international ETFs like EWY, but I've read something called the PFIC tax. What is this tax and what are your thoughts on diversifying into international ETFs versus just sticking with the domestic options? So Tim, when we saw this question, Robert was vaguely familiar. I'd never heard of it. So I looked

this up on Investopedia and what PFI stands for is passive foreign investment company. And what I'm seeing here means that if the company is earning at least 75% of their gross income in a passive manner, right, not derived from regular business operations, think maybe real estate or like, I don't know, crypto mining or something. And at least 50% of the company's assets are investments which produce income in the form of earned interest, dividends or capital gains, then it is in fact a PFIC company. Well, what does that mean for you and why do the taxes matter? So what I understand is in 1986, the IRS passed a new law that essentially closed a tax loophole which some U.S. taxpayers were using to shelter offshore investments from taxation through these

PFIC companies. I'm not seeing that it is the case today. I would imagine if you are earning income from these investments, you got to pay taxes on them. So I don't think this is something to really shy away from, right? If you see this, you get kind of spooked. I don't think that that really matters. Maybe you have to file a different form with the IRS, ask your accountant about the money you've received from foreign entities. I'm sure it's all very like flushed out now, right? This is like 40 years ago. But it wouldn't really like spook me. If you want to invest into a international ETF, like be my guest. I'm not doing that. I always like to bet on the United States. I think there's a lot more innovation here than in other countries. But that's just my humble opinion. So my take on this is I'm not sure why you like EWY. That can come at a later date or email us or DMS and explain that investment and why you like that one. I do invest in companies. I've got an investment right now that's doing really well in South Africa. And I will be required to pay taxes on those dollars as it's migrated back to the United States as income, even though it is in an LLC in that country. So definitely you have to look at that. But I would also open kind of your thoughts up to

other international funds that maybe could do better like AIQ or maybe VT or something like that, something that's got has the international flavor and the upside of international markets without putting yourself kind of in that place where you don't understand the markets as well. And looking at EWI, I just don't see the returns in the upside. So maybe there's something you know that that we don't see. But definitely, you know, make sure you follow the rules and make sure that the net ROI is worth it for the additional work you have to do when investing in international markets. Well, Tim here used the word diversifying into international markets. And we talk about Robert a lot, the idea of opportunity cost, right? Tim, by investing $10,000 into these

international markets, you are now missing out on $10,000 you could have had invested into the NASDAQ, which is up 40% this year, right? So just understand and kind of weigh your options there. It's like you're diversifying into international markets because you might think that there's a crash coming. And so you want to like keep funds or like whatever's going on your head, make sure that you're taking into account opportunity cost. That's super, super important. Love it. Great question. But at the end of the day, it's always about optimizing your money and making sure you're not over diversifying into, you know, investments that may not, you know, end up having the best returns for you. Really good question, Tim. So our next question comes from Ryan.

Ryan says, I'm from San Diego. I'm self-employed. I max out the 401k. I do the IRA. I do profit sharing through my work. I invest in fund rise. I have this all going on with e-trade and I do that every week. I focus on time in the market and not timing the market like you all suggest. Round of applause for Ryan. Now here's this question. I'll have around $10,000 to invest at the end of the year. What would you invest in if you were me? So, Ryan, before I get into that, just kind of confused though. You said yourself employed, but you're also maxed out the 401k. Maybe it's a solo 401K, but then you also said profit sharing at work. So I'm going to answer the question as if you are a full-time employee somewhere and you also have a side hustle, which is the self-employed section of this question. So let's just try that. So Rock and roll with the 401k, that's great. I'm assuming you have autonomy over that. You're really happy with how the returns have been every year.

You're feeling good. IRA stuff is great. Roth IRA maxing that out. $7,000 next year is going to be really exciting. So maybe even carve out $7,000 of this $10,000. So when January 1 hits, you can immediately deposit that into your Roth IRA and have that completely invested throughout all of 2024. I would also, I did not hear anything about crypto inside of this question.

We like crypto. We want to have a little bit of taste of crypto. That might be 5, 10, 15% of your total invested assets. For me, it's a little bit more. For Robert, it's a little bit more. But we're kind of nerds and we like it a lot. But for the average person, I think 515%, somewhere in that range is really, really healthy. But Robert, L. You take a stab at this as well.

Yeah, that was a great, long-winded answer. And for me, it's all about crypto. Now, not knowing Ryan's age, I don't think he provided that. But yeah, for me, I would say I would get as much of that, depending on your risk tolerance into crypto, because that is one of the key pieces you're missing in your portfolio. And you need to have diversification into the cryptocurrency space. I just think it's just really not a good thing for anyone,

because the upside risk far outweighs the downside risk in crypto moving forward now that we're getting to legislation, we're getting to full adoption. Things are moving forward with all the largest funds and companies in the world and agencies and banks and governments. I just think that it's it's a crime not to have a portion of your portfolio in crypto. And depending on your age, I think you could go 5, 10%, like Austin said. We're higher, but we also have a very large base in all of our other. other investment strategies and portfolios. So you just have to look at it that way. But definitely for me, it's crypto, crypto, crypto,

crypto, that's what I would do. And stick with the basics. You could literally start with Bitcoin, Ethereum, chain link, XRP, maybe some quant, and just stick with the basics of the ones that have the most adoption and the biggest, you know, long-term upside through safety. Don't start yoloing into a bunch of meme coins. That's not a good strategy. And Ryan, if you aren't kind of intimidated about opening,

up that Coinbase account or opening up one of these, you know, crypto accounts to get a little bit of diversification into those assets, you can probably go to your fidelity and you can type in B-E-T-H, like the name Beth, and that's going to be the pro-share's Bitcoin and Ethereum market-cap weighted strategy ETF, essentially by having some money in that, you'll be able to see the upside of both Bitcoin and Ethereum throughout the next several years in your investment portfolio. It is a really great alternative for those who don't want to actually have custody of the currencies. Really good question, Ryan. Now, this question is brought to you by Grit Capital, the best finance newsletter. If you haven't started reading it yet, you get all the finance knowledge

you need in just five minutes a day. It's full of memes. They make it personable. Headline news, everything you need to know to stay current on all financial events. Go check out the link in our show notes below or just go to gritcap.io and drop in your email address and get smarter five minutes per day. Now, this question comes from Nate M. And it's more of a suggestion than a question, Robert, And I actually really agree with him here. He says, can you all please address the myth of paying rent in advance? It's making rounds again on social media and it's upsetting me. The money should not be sitting in the landlord's high-yield savings account earning interest

at 5.5% but instead should be in the renter's high-yield savings account earning interest at 5.5% even if it's just an extra $10 per month, compounded over 10 years if invested, is a serious chunk of change. Nate, I'm right here with you, man. I've actually not heard of this myth of paying rent in advance. It's not something I guess I would encourage anyone to do because he's completely right. Time value of money. Money in your possession and money that's being put into a high yield savings account

earning $8, $10, $15, $20 a month extra because you are setting an aside and not paying it to your landlord early, that money is extra money, right? You can take that and you can go invest it in, like we said, we're up 40% this year in the NASDAQ, 20% in the S&P 500, right? That is compound interest that, you know, Robert says it all the time. If your money does not have velocity, it's dead money. And by having your money put in these high yield savings accounts and earning money for you versus earning more money for your landlord, right?

Who wants to do that? It just makes so much sense not to pay extra on your rents and pay all your rent in advance for the year. But Robert, you've been a landlord before. What are your thoughts on this sort of idea? I've got a deeper, deeper plan for this. And it should be done on the blockchain. and very soon. I think it's crazy that these landlords and me being one of them get these deposits

and we can do whatever we want with it as long as we can return it when the term is up. So, you know, technically those deposits should be put somewhere. And in my opinion, there should be an app and a platform built. So the landlords put all their deposits into said platform. And let's say that they are invested into high yield savings accounts like you allude to. And I believe that should be able to be checked on by the tenant as well. And then at the end of the term, the tenant and the landlord split the profits on the deposit. Because if you think about it right now, you go pay a $5,000 deposit down on a new apartment or condo or whatever it is. That landlord goes. And let's say you stay there for 10 years. And I haven't done the math yet, but $5,000 into an account making

5, 6, 7, 8% for 10 years is a tremendous amount of return. So I agree 100%. Somebody needs to build this platform. Maybe Austin and I will build it because at the end of the day, the landlord shouldn't be able to make all that money on your money and you not get a piece of it. As far as the pay rent advance part of this, I think it just became popular for so much. many people that are high earners with bad credit or lower than the necessary criteria of credit or earnings. So a lot of times over the years, I've seen this play out where someone will offer six months or a year to the landlord to kind of avoid the criteria that they don't meet. But as a general practice, I think it's a terrible idea. You want as much of your capital working for you

and not the landlord. But if there's another wrinkle to this that I'm not aware of, then I'd love to hear about it. But in my experience, I've never seen it done any way other than what I just described. Yeah, I think at the end of the day, what's really important here to understand is it all just comes back down to a velocity of money. If your money is sitting in someone else's account that you don't have control over so you don't have to worry about paying rent for the next six months, Like just take the money and put it in your own high yield savings account and then scrape some off the top to pay your rent on a month to month basis, right? I mean, that's the way people should be thinking about this. Yeah, it definitely is upsetting.

I totally understand where you're coming from here because what people don't realize is that extra $8, $10, $20, $30, $50 a month that they're earning in this high yield interest account. If you take that and go invest into the market, to your point, over 10 years, that turns into a lot of money. I mean, just the other day, we were talking about how to eat an elephant one bite at a time, the elephant of $100,000 in your account. And that was $450 a month, which is a lot more than, you know, call it the 10 or 20 bucks we're talking about here. But it just really quantifies that. We're talking about thousands of dollars of money left on the table because you decided to pay your rent early versus putting it into some other accounts and invest the difference. So, oof, I never thought about this one, but really, really good point here, Nate. Yeah, and I want to touch just one more time on this. It's really all about understanding making your money work as hard for you as you work to get it.

I would say over 70% of society does not understand that simple nugget. They'll have money sitting in a savings account, money sitting in a checking account, and they just don't have the money spoken for and active. And the key to building wealth is to make sure you always have velocity on your money. So your money is making money. And in this instance, it's just another way to look at optimizing your gains on your money and not letting someone else do that. Very well said, Robert. Really good question, Nate. So our last question comes from Joanne.

Joanne says, hi, I recently came across your podcast and I absolutely love it. Thank you, Joanne. We appreciate it. I'd like to hear thoughts around gifting a baby, a savings bond. My grandbaby just turned one years old and I'd like to gift her a $100 savings bond. What are your thoughts? Yay or nay? So savings bonds, right? Like, I, come on. We're not doing savings bonds anymore, are we? This is not 1985. We have much better ways to make money for our. future, you know, world leaders. So we got to step it up and look at some of the modern practices we can use to really, really do well for them. I mean, here's what I'm thinking, right? At the end of the day, there's a really great way for you to help out your grandbaby. And that is by making sure that you help take the burden of student loans off of their shoulders if she wants to go to college. So what I've decided to do, and I'm really encouraged you to do the same, Joanne, is I opened up a 529 plan for my nephew. I've got a couple nieces and nephews. And so it's, I think it's kind of transferable there. But long story short, I have a 529 plan open for my nieces and nephews. I had to

initially invest $3,000, which is a lot more than what you are alluding to here with your $100, but that's just because of the platform I used. You can start with a hundred bucks and just put away $100 a hundred dollars a year or $100 every six months or something, whatever you can afford. And by doing that and making sure it's invested into the right markets, S&P 500, you know, VGT, QQQ, things like that, you will be able to see not only this, you know, your savings bond had gone from 100 bucks to maybe 200 over 18 years, where this 529 plan will go from a couple hundred bucks to a couple thousand, maybe a couple tens of thousands of dollars, depending on how much you decide to invest into it. And now you're asking what happens if they don't want to go to college?

That's fine. You can roll over $35,000 of this into their Roth IRA and at an average return at 11% from 18 to 65, they will have over a million dollars in their retirement account. So when you think about, you know, you have this extra 100 bucks and you want to get them a savings bond, I'm not mad at the idea of the generosity. It's a really, really kind gesture. But being able to optimize that and do it in such a way that's going to set your grandbaby up for more success in the future, if that is, you know, less student loans, decided they want to pay it off and use your money. Or maybe it's they want to roll it to in a retirement account.

There's so many better ways to think about this. Yes. So currently I have a stack of savings bonds from my mother in my desk drawer, still in Ohio at the office. And the way to look at it is over time, you know, these bonds generally only pay out like two, two and a half percent a year. And if you look at just the S&P 500 with an average of 11 percent per year, you can see that the gains are nearly five times what they would be with the savings bond. So I love the generosity, love the idea, but let's switch it up from the savings bond to, you know, a high yield savings account, the 529 account, or even starting that custodial Roth IRA and putting in that $100 a month, $100 a year, and invest into these funds that we discuss that can give you much better returns over the long run.

So that would be my take is to really optimize that money rather than putting it somewhere where the returns are so negligible that it's just not going to do a lot of good over time. Very well said, Robert. Joanne, we commend you on your generosity. We are so excited that you found the Rich Habits podcast. We're so excited that everyone found the Rich Habits podcast in 2023. If you missed it, we had 119,000 people have the Rich Habits podcast as a top five podcast in their rotation throughout the year.

We're so fortunate and so grateful. And 38,000 of those. We were number one, Robert. Unbelievable. So everyone, thank you all so very much for tuning into this episode of the Rich Habits podcast. Don't forget to leave us a five-star review. If you're listening on Spotify or Apple or wherever you are right now, give us a thumbs

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