My five-year-old son just won $1,000. I’ll help turn it into $76,000.

Let me explain.

In May 2020, with offices and daycare centers still closed, my wife and I found ourselves adjusting to working from home with a child. As has become the new norm, we have attempted to create a more productive workspace in the basement. To help you, we have purchased and assembled a bookcase, two ergonomic chairs and a desk. Since our then three-year-old son was home with us and wanted to play, we pretended to let him help us set everything up. And we took a photo of him working next to me and posted it on social media.

He racked up over 500 likes on Instagram, but little did we know there was a more valuable prize up for grabs.

We were soon contacted by a company that specializes in researching social media content and licensing it to brands for marketing purposes. They encouraged us to sign up for their service and despite our initial hesitation, we agreed. Nothing happened at first. Then, two years after the photo was published, they told us a brand was interested in licensing the image and offered us $1,000 to let them use it for a marketing campaign. We agree.

Since our son was the real reason the photo was interesting, we knew exactly what to do with this surprise cash bonanza.

Make your children rich by investing for them

As parents with a passion for wealth building, we had recently opened a deposit brokerage account for him, which we had wanted for a long time. These types of accounts are sometimes referred to as UTMA/UGMA accounts, which are acronyms for Uniform Transfers to Minors Act and Uniform Gifts to Minors Act: federal statutes that allow assets to be passed on to children without establishing a formal trust.

Our son is only five years old and unable to make investment decisions, but custodial accounts allow us to invest the money he receives or earns in his name until he reaches a certain age. This age differs, from state to state, and when it is reached, control of the account passes from the account custodians (likely the parents or legal guardians) to the child. In Georgia, where we live, it will happen when he turns 21. In some states like California and Louisiana, the transfer of account ownership takes place when the child turns 18.

Since we’ve already established and funded his Georgia Path2College 529 plan for our son’s future education needs, we thought the custodial account was a great way to invest money for him that offered more great flexibility. Unlike a 529 account, money in a custodial account can be used for anything, not just eligible educational expenses. And since this money was unexpected, we chose to treat it as a gift with the aim of growing it for him in the future. It could be used to help start a business, support social causes, or buy your dream car. Whatever he chooses, to help make that dream come true, we knew we had to invest in it.

Our investment choices

Our preferred investment approach is with stock index funds because they are diversified and affordable compared to more expensive actively managed funds. But in this case, we are ready to assume higher risks and expenses than we are used to, since the money was not planned and we will have ample time to grow. In the end, we chose to invest the entire $1,000 in FSPTX, Fidelity’s Select Technology Portfolio. It is a technology sector mutual fund, which means it includes technology stocks like Apple, Microsoft, Salesforce and Cisco Systems. Given my own experience watching tech companies transform into big global companies over the past 20 years, there’s little reason to believe that their growth won’t continue for the foreseeable future.

Over the past three years, the average annual total return for this fund was 23.27% and the average annual 10-year rate of return was 18.94%. This means, assuming there are no more additional contributions, if we had made this $1,000 investment three years ago, it would be worth $1,873 today. If we had made the $1,000 investment in 2012, it would have been worth just under $5,700. For our son, assuming we don’t get the $1,000 until the custodial account is legally required to be transferred to him in 2038 and assuming the lifetime annual rate of return of 13.49%, this surprise windfall will reach $7,573.

If we stick to our plan, which is to fund his account with $100 a month until then, it will grow to over $76,500.

Three steps to open a UTMA

Opening a custodian account is quite simple and can be done quickly online. You will need basic information like the child’s name, date of birth and social security number. Second, you will need to provide the same information for the custodian (or custodians, assuming you want multiple adults to have access and control of the money). Finally, you’ll need to link the new account to a funding account, such as a checking account or personal savings account. Once that’s done, it’s as simple as processing a transfer and selecting the stocks or mutual funds you want to invest in.

As a black man and someone who grew up on the edge of poverty, I am extremely proud of my role as a father and breaking the cycle of struggle I was born into. It’s my job to teach my son how to make good decisions, how to treat others well, and how to navigate the environments around him. This deep sense of responsibility goes far beyond just teaching him how to brush his teeth or put his shoes on the right foot. This includes how to manage your money well, how to invest wisely and seemingly, and how to take decent photos.