According to a survey by Forbes and market research company Prolific, nearly 80% of Americans between 18 and 41 have gotten financial advice from social media. While these platforms are convenient and approachable, they can have pitfalls.
For instance, the bite-sized lessons on “FinTok,” TikTok’s popular personal finance section, can be appealing for users who want to learn more about investing, buying stocks or saving for retirement. Unfortunately, misguided financial advice, myths, scams and dangerously misleading information are rife on the platform.
Should You Open a Roth IRA for Your Child?
One FinTok topic that’s trended lately is a tax “strategy” that involves opening a Roth IRA for children. While there is no minimum age limit for a Roth IRA account, your child must have earned income to qualify. That means they must have a genuine job, which could conflict with child labor laws.
If you own a business, you could get around this by hiring your child. Of course, the job and pay rate would need to be legal and legitimate. Additionally, any wages they earn could be subject to payroll taxes. A child who works part-time as a babysitter or dog walker could technically be an independent contractor, but they would be subject to self-employment tax. Either way, it would be wise for the child to file a tax return, which creates an administrative cost and burden.
If you are interested in Roth IRA planning for your kids, the recently enacted Secure Act 2.0 allows people to roll up to $35,000 in unused 529 funds into a Roth IRA. Depending on your child’s age, this is a very long-term strategy, but makes 529 contributions more enticing.
The Value of Experienced CPA Guidance vs. Online Trends
TikTok may be a fun place to learn cooking tips or the latest viral dance moves, but it shouldn’t be where you go for financial advice. There’s no replacement for the professional expertise you’ll find by working with a certified public accountant.
When safeguarding your financial future, relying on an experienced CPA offers advantages and comprehensive services online sources can’t match.
- Depth of knowledge: A CPA has undergone rigorous training and stays abreast of the latest in financial regulations, tax codes and investment strategies. A 60-second video can’t capture this depth.
- Personalized advice: Everyone’s financial situation is unique. What works for your friend or neighbor may not be right for you. CPAs provide tailored advice based on a comprehensive understanding of your financial goals and current situation.
- Accountability and ethics: CPAs adhere to a professional code of ethics. They have a fiduciary responsibility to act in your best interest, whereas online influencers might have undisclosed affiliations or agendas.
- Understanding complexities: CPAs can decipher intricacies from tax implications to the nuanced pros and cons of specific investment vehicles, ensuring you make informed decisions.
- Long-term relationships: Financial planning is not a one-time event. Building a relationship with a CPA ensures consistent guidance throughout different life stages and financial challenges.
- Avoiding misinformation: Anyone can create a TikTok account and gain followers by speaking confidently into the camera. Also, no official organization monitors TikTok to check whether content creators offer valid financial advice. FinTok videos tend to provide general information that doesn’t account for the viewer’s risk level. As a result, they skip some crucial nuances a CPA would quickly point out, including legal ramifications.
- Holistic approach: A CPA considers all aspects of your finances, like taxes, estate planning, investments and retirement, to ensure they all work harmoniously together.
At Raines & Fischer, we take finances personally. Our approach is grounded in our years of expertise, our dedication to our clients and our commitment to ensuring they have the best financial advice. In an era where anyone can share financial “wisdom” online, we stand by the value of personalized, expert guidance. Trust in our knowledge, not in trends. When you’re ready to plan your financial future, we’re only a phone call away.