In “Teaching Your Children about Money” in the March/April issue, the author talked about stewardship, giving, saving, deferred gratification, the danger of debt, and other good subjects. In this followup article, we will deal with planning for the future.

Proverbs 22:3 says, “The prudent sees danger and hides himself, but the simple go on and suffer for it.” Only God knows when a new economic depression might come, or another pandemic might hit, or a natural disaster might devastate an area; but the prudent sees the possibility of dangers and plans accordingly.

There are several things we could do to prepare for the future, things that our children would see and learn. One action would be not living from paycheck to paycheck, but having a cushion for an emergency. It’s good to help your child open a savings account and put money away. The savings account is accessible if needed, but serves as good training to save. A second action would be having supplies of food and other necessities in case we are without power for an extended period of time. Our children can learn from us if we are investing for ourselves and also for the kingdom of God.

How can our children plan for the future and invest in a way that prioritizes God’s kingdom and His church and provides enough income so that they are not a burden on the church or on their relatives? We will address three areas of investing and planning for the future: educational planning, general investing, and retirement planning.

Educational Planning

Qualified tuition programs, often called 529 plans, are good vehicles by which to save for schooling costs. Usually, the parents contribute to and own the account, with their child as the intended beneficiary. Three things to remember: 1) When you take the money out and spend it on education, the withdrawals are tax-free. 2) Withdrawals may now be used for private elementary and high school costs, not just for college. 3) Several states give deductions on the state tax return for contributions into a 529 plan.

When it comes to college decisions, be wise! Think long and hard before paying (or borrowing) thousands upon thousands of dollars for a college education. How will student loan debt affect your freedom to be generous with others and with your church? Spending thousands on college may be the right thing for some students, but others will do well to choose an affordable online option. Still others will excel by learning valuable skills that require specific training. How difficult it can be these days to find good, available electricians, plumbers, and craftsmen of all sorts. These are wonderful vocations.

General Investing

Must my child be a certain age to invest in stocks? While those under 18 cannot legally open a brokerage account, they can have custodial accounts opened in their names. UGMA (Uniform Gift to Minors Act) accounts and UTMA (Uniform Transfer to Minors Act) accounts are initially opened in the parent’s name, and the child takes control of them at age 18 or 21, depending on the state. Meanwhile, the child can be aware of and help in the investment decisions related to the account. With an initial investment of $1,000 into mutual fund stocks and continuing investments of $1,000 per year, in 30 years your child could have $130,000.

Retirement Planning

Many aging individuals or couples who gave little or no thought to planning for their advanced years don’t have many options, and they struggle to be generous, even if they would like to be. Many young adults say, “Old age is so far off, I don’t need to think about it now.” Thinking about it is too often postponed and postponed.

So, what should you think about? There are two main types of qualified retirement plans. What do we mean by qualified? This means that the money you contribute to the plan grows (earns interest and capital gains) tax-free; you don’t pay tax on the earnings while it grows. The two types are: the 401(k) and similar plans, and the IRA, both of which got started in the 1970s.

When you take a job, many times there is an option to have some of your wages be deferred into a 401(k), 403(b), or a similar retirement account. This is the meaning of deferred compensation. It is still your money, but has been placed by your employer directly into a retirement fund before you receive your paycheck. This is a good habit for a young employee to adopt! Discipline yourself before the expenses of older age or a family tempt you to postpone saving.

Besides the obvious benefit of saving, you will not pay income tax (in the present) on the portion of your wages that are deferred in this way. Additionally, some employers will match the employee’s contribution so that even more is being put into the 401(k). If you contribute $4,000 annually to your 401(k), after 35 years your 401(k) could easily be worth $600,000.

Maybe you don’t have the opportunity to fund a 401(k) or maybe you’re still quite young, but you see the value in setting aside funds for your golden years. What can you do? You can establish your own plan by opening an Individual Retirement Account (IRA) at a bank, quite independent from an employer. You do need to have earned income in the year that you contribute, with the exception of a spousal IRA, which we won’t get into here. There is a yearly contribution limit of $6,000/year, or $7,000/year if over age 50.

If, at age 21, your child starts putting $25/week (cost of a meal out) into an IRA earning 5% per year, at age 65 the IRA would be worth $201,667. If he/she contributes the maximum per year, this could amount to $700,000.

When it comes to tax benefits from IRA contributions, you have a choice. With a traditional IRA, you get the tax benefit now and pay tax later at withdrawal. With a Roth IRA, there’s no tax deduction when you contribute, but you withdraw funds tax-free in the future. (Hint: do a Roth if you can!) Either way, an IRA is a great method to save and plan ahead. Can you contribute to an IRA and 401(k) in the same year? Answer: yes, but check with your tax advisor about certain conditions.

Why is it important to think these things through—education, investing, retirement planning—early rather than late? Is it so we can always have plenty, drive a smart car, and enjoy a spacious mansion? Not primarily. While God may bless you with some of these things, He wants all of you, which includes your wealth.

I remember an elder in the RPCNA who was astute in these areas, had planned and invested well, and had sizeable wealth. I already knew he was a gracious man and generous with his money to his congregation, to RPM&M, and to various ministries within and outside of the RPCNA. Then I visited his home. I was expecting something different, but he and his wife welcomed us into a modest home, nicely furnished but not overdone. This spoke volumes to me about their priorities, the kingdom of God being at the top.

We challenge you to plan well, as we’ve discussed here, for the sake of the kingdom. You will be able to give generously to the needs around you, to your local church, to many good ministries of our denomination through RPM&M, and much more. Even at death, in your will you can make God’s people and God’s work a priority. Proverbs 27:23 says, “Know well the condition of your flocks, and pay attention to your herds.” Read further in this passage, remembering that we mustn’t grasp wealth in a wrong way, but knowing that God blesses careful planning.