I’m a financial adviser—how to make your baby a millionaire by 30

In today’s economic climate, with rising living costs and endless layoffs, it can be hard to fathom how to build wealth for yourself, let alone someone else. But financial experts agree that there are steps parents can take to help ensure their baby reaches significant wealth by 30. And whether you have kids or not, these same insider hacks can be applied to your own payday routine, too.

The math, according to one adviser, is startlingly simple. Investing $1,000 a month from the moment a child is born, at a 7 percent average annual return, would grow to roughly $1.2 million by the time that child turns 30. It is not a lottery ticket but time, discipline, and compounding—advantages that, experts say, are more available than most realize.

Newsweek spoke with Scott Stratton, founder of Good Life Wealth Management, who has worked as a fiduciary financial adviser since 2004, helping families navigate investments and wealth goals. If that $1,000 per month from birth is unrealistic at the moment, there are other steps people can take.

‘A Head Start, Not Dependency’

“Parents should not try to make their kids rich by simply giving them money,” Stratton told Newsweek. “The real goal is to help children become financially independent adults.

“There is a big difference between giving a child a head start and creating dependency.”

The best help, he said, is tied to behaviors that build wealth, such as, education, earning power, avoiding bad debt, starting to invest early, and making smart housing decisions.

Step One: Dodge the Student Debt Trap

Stratton identified several areas where he believes parents can have the biggest impact—starting with student loan debt.

“Education is one of the most important engines of upward mobility, but families have to be much more thoughtful about return on investment than years ago,” he said.

His rule of thumb? Total student debt should never exceed one year of a graduate’s expected starting salary. Ideal debt, he said, is zero, and can be achieved through 529 savings plans, in-state universities, scholarships, employer tuition reimbursement, and, when appropriate, Public Service Loan Forgiveness.

Step Two: Start Investing From Day One

The second lever is starting to invest as early as possible.

“Time is the one advantage young people have that older investors can never get back,” Stratton said. “Even small amounts invested early can become meaningful wealth over 30 years.”

Once a child has earned income from a job, he said, parents should consider helping fund a Roth IRA, allowing a teenager with a part-time job to begin tax-free compounding decades before most adults even start thinking about retirement.

Step Three: Match Good Behavior, Not Bad Habits

Third, Stratton recommends parents match good financial behavior rather than simply hand out cash.

If a child contributes to a Roth IRA, a parent can match it. And if an adult child moves back home after college, he said, that time should be used productively by maxing a Roth IRA, contributing to a 401(k), building emergency savings, and making career progress.

“Otherwise, the parents may simply be subsidizing consumption,” he warned.

Step Four: Avoid the Big Early Mistakes

Fourth on his list is avoiding the early mistakes that quietly derail a young adult’s finances.

“The biggest wealth destroyers are often not investment mistakes,” Stratton said. “They are student loans that are too large, car payments that are too high, credit-card debt, buying too much house too soon, and delaying investing for the first decade of work.”

Step Five: Don’t Rush Into Homeownership

That leads to his fifth point, that homeownership is not automatically the right move.

“A home is not automatically a great investment,” he said. “For a young adult, buying a house can be a mistake if it makes them house rich and cash poor, or if it prevents them from moving for a better career opportunity.”

Renting, he said, can be the smarter choice for anyone who may relocate within five years. Parents who want to help with a down payment should first confirm their child has stable income, cash reserves, retirement contributions already underway, and a realistic grasp of taxes, insurance, maintenance, and repairs.

Get Your Own House in Order First

Finally, Stratton stressed that parents need their own financial house in order before extending help to their children—including a comprehensive retirement plan and an estate plan.

“The American Dream is becoming harder to achieve,” Stratton said. “College is more expensive. Housing is less affordable. But parents still have enormous influence. The families who combine early investing, smart education choices, and thoughtful financial support can give their children a very different trajectory than other families who have similar incomes.”

Contact Newsweek editors on this story: Kara Dolman and Emma Lee-Sang.