By India McCarty
This new TikTok hack promises to help kids retire with $4 million, but it requires some major help from parents.
“I know this isn’t going to work for everybody,” real estate agent and content creator Freddie Smith said in a recent video, but explained that if teens and parents can work through his plan, “they just took one of the biggest stressors of all of us millennials off their back at the age of 21, because their retirement is going to be so plush just by those three years of sacrifice. And they’re also learning about money.”
@fmsmith319 How a young Gen Z could retire with 4+ million dollars
Smith’s financial plan covers five years and promises to set teens up to have $4 million saved by the time they reach retirement age. The catch? His plan also requires young people to live with their parents until 21. It also doesn’t account for attending college.
Essentially, Smith’s plan requires 16-year-olds’ to get a job that would allow them to make $1,200 a month. At 18, they would need to move to a job that pays at least $35,000 annually and continue living at home. During this time, parents would still be paying for food and housing.
The critical part of Smith’s plan is that the teens would also invest $25,000 of their earnings into the stock market every year into a fund that grows by 10% per year.
MarketWatch looked into the validity of Smith’s plan, sharing it with different financial advisors. Some pointed out that he operated under some pretty unlikely assumptions, such as that 10% average annual growth rate on investments.
Others were concerned with the lack of any acknowledgements of emergencies, paying taxes or dealing with the costs of car ownership, while many wondered what a 21-year-old would do for work at the end of the five years if they don’t earn a bachelor’s degree.
Related: How Sound is TikTok’s Financial Advice?
“A lot of it makes sense to me. It’s a great opportunity to stay at home, make money and start investing,” Luke Harder, a financial adviser at Claro Advisors, said, but added, “I think not a lot of kids do want to live at home past that age [of 18]. And not all parents want their kids to live at home past that age.”
Larry Pon, a financial planner and accountant in the Bay Area, addressed worries some might have about their child not attending college, saying, “Not every kid should go to college…A lot of tradespeople — plumbers, elevator guys — they make good money.”
Many financial experts recommended implementing parts of Smith’s plan, or maybe not taking each component to the extreme.
For example, Money Talks News encouraged parents to “start with achievable goals,” like opening a Roth IRA or having them meet with a financial advisor to talk about budgeting.
“Smith’s viral strategy contains a kernel of truth,” the outlet wrote. “However, expecting teens and young adults to follow such a strict plan may overlook modern realities and the value of formative experiences. Parents can support their children’s financial future without putting their own lives or their children’s on hold. Start early, stay flexible, and build lasting financial habits.”
While Smith’s financial tips might not be realistic for you or your teen, they provide a good jumping-off point for parents looking to teach their child how to handle their money.
Read Next: Gen Z Cares Less About College, and Mike Rowe Says That’s a Good Thing
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