One of the biggest conundrums parents face is managing their own emotions when a stock market, real estate market, or any other risk asset takes a dive. On one hand, it’s painful to watch your portfolio shrink. Every dollar you lose represents time, the most valuable commodity of all.
On the other hand, there’s a quiet thrill knowing your children now have a chance to buy at lower prices.
After a prolonged bull market, it’s natural to wonder whether our kids will be financially screwed as adults. We’re already seeing it play out with young adults today. They’re struggling to find well paying jobs and unable to afford decent homes in most major cities. So they end up returning home to their parents, which is a great way to save, but a tough way to launch.
If asset prices continue compounding at high single digit or double digit annual rates, what does life look like for them in 10 or 20 years? We could very well see the median home price in America top $1 million in 20 years. Every year a child spends in school rather than working and investing is another year they fall further behind as prices rise without them.
So whenever the market corrects, instead of wallowing in my own losses, I get genuinely excited to fund my children’s accounts and buy the dip. A downturn finally gives children the ability to catch up, if they or their parents invest for them.
War, Rising Oil Prices, and New Investments For My Kids
Every year, I make it a point to fund both of my children’s custodial investment accounts up to the annual gift tax limit. In 2026, that limit is $19,000 per child, unchanged from the year before.
Two weeks before the war, I had sold just over $100,000 in stock to take some risk off the table, letting it sit in a money market fund earning 3.3% annualized. Then, after the start of the second week of war-driven volatility, with the S&P 500 sliding toward its 200-day moving average near 6,600, I decided to put that cash to work.
I transferred $19,000 to each child’s investment account. On the morning of Monday, March 9th, I invested ~$5,000 each into the Vanguard Total Stock Market Index ETF, VTI.
I don’t know where the bottom is. I’m hoping 6,600, the approximate 200-day moving average for the S&P 500. Or maybe we head down to 6,500 if oil prices rocket higher. Surely, my new investments for them could continue to go down. But with the S&P 500 down roughly 6% from its highs, I was glad to be doing something for their future.
Over the past 20 years, I’ve made it a habit to dollar-cost average whenever the market corrects by 1% or more. A correction greater than 5% gets me giddy. That excitement keeps building until we hit roughly 20% down, at which point the fear starts creeping in.
Maybe this time the world really will come to an end. But of course, it never does. The market always finds a bottom, and eventually goes back up.
Given how volatile the past month had been, I didn’t have the conviction to deploy the full $19,000 at once. But $5,000 each felt like a meaningful start, with more to come if the market continued to slide. My wife can also gift $19,000 a year too if things get really bad.
There’s something that just feels right about investing for your children. Not only do you give, but you also take action as well. Most of whatever money I have left in the end will go to them anyway. I might as well put it to work now, when it has decades to compound.
How I Think About Investing During a Correction
Let me share the mechanics of how I actually deploy money when the market pulls back. I think this framework is useful for anyone trying to invest for their kids without the stress of trying to time a perfect bottom.
I use a simple tiered approach. When the S&P 500 drops 1% to 2%, I invest between 5% to 10% of my cash, enough to feel like I’m participating but not so much that a further decline would sting. My cash continuously gets replenished with passive investment income, rental income, and online income each month.
A 3% to 5% correction gets me meaningfully engaged. I start allocating between 10% to 40% of my cash, knowing that each leg down is another opportunity to lower my average cost.
By the time we’re down 10%, I’m deploying as aggressively as my risk tolerance and cash reserves allow, usually somewhere between 40% to 75% of my cash.
At 20% or more, the fear starts to kick in, but I usually end up investing aggressively with 75% to 100% of my cash. It’s stressful, temporarily living paycheck to paycheck. However, historically, I know the odds are in my favor if I can just hold on until a recovery. Having no money motivates me to save and earn.
The key mental shift is this: I’m not trying to call the bottom. I’m trying to dollar cost average into a market I believe will be higher in 10, 15, and 20 years. For a child’s custodial account with that kind of time horizon, near term volatility is an opportunity.
Having a preset plan helps take the emotion out of the decision in the moment. When fear is highest, the plan tells me to buy, not freeze.
The Three Phases of Helping Our Children
What really struck me during this correction was a simple realization: before prices dropped, I actually forgot to transfer any money to my kids’ custodial investment accounts, and we were already more than two months into the year. I was entirely focused on protecting my own portfolio.
The correction snapped me out of that mode and reminded me that my children’s financial future deserves just as much strategic thought as my own.
There are essentially three distinct phases in which parents can make a meaningful financial difference in their children’s lives, and most people only ever think about one of them.
Option 1: The Inheritance (the main one)
For the longest time, the default assumption was simple: work hard, accumulate wealth, enjoy retirement, and leave whatever’s left to your children when you die. It’s the path of least resistance. You never have to worry about running out of money because you’re keeping it until the end.
The problem is timing. If you live into your 80s or 90s, which is increasingly common, your children may be in their 50s or 60s when they finally inherit. By that point, they’ve already navigated the hardest financial chapters of their lives largely on their own: finding jobs, buying homes, raising kids, building retirement accounts.
The inheritance arrives too late to matter most.
Option 2: Strategic Gifting During Early Adulthood
The second phase is more intentional. You gift money to your children during their most difficult financial years, typically from their early 20s through their mid 30s. This is when a financial boost matters most. They’re relocating for a first job, saving for a down payment, or trying to build an emergency fund while also paying off student loans.
A $50,000 gift at age 25 is worth far more to a young person than $200,000 at age 55. The earlier dollars have decades to compound, and they arrive at a moment when the recipient actually needs them. Many parents who are financially comfortable haven’t thought explicitly about this. They’re still operating on the inheritance default. It’s worth reconsidering.
When I sadly sold my house too soon, at least it was a quick 13-day all-cash close with no contingencies. The buyer was making good money at big tech, but it was the Dad who wired the entire sum over in a preemptive offer.
The 2026 annual gift tax exclusion is $19,000 per person per year. That means a couple can gift $38,000 to a single child annually with zero gift tax implications. Grandparents, uncles, and aunties can gift money too. Over a decade of consistent gifting, that’s a substantial head start.
Option 3: Investing for Your Children From Birth
The third phase is the most powerful of the three. You start saving and investing for your children while they’re still at home, ideally from birth or early childhood. Start with opening up a 529 plan the year of their birth, and then a custodial investment account.
Consider the math. If you invest just $5,000 per year into a custodial brokerage account starting when a child is born, and that account earns an average 10% annual return, you’ll have contributed $90,000 by the time they turn 18. But the account will be worth over $250,000, thanks to compounding. That’s a life-changing number for an 18 year old just starting out.
Beyond the custodial account, there’s the custodial Roth IRA. Once your child earns any income from a part-time job, lawn mowing, babysitting, or a formal summer job, they’re eligible to contribute to a Roth IRA up to the amount of their earned income (capped at $7,500 in 2026). Earned income is key here.
The Roth is arguably the single most valuable financial account a young person can own. With children’s low income, contributions are usually tax-free. Growth is tax-free. And withdrawals in retirement are tax-free.
With kids at home for 18 years, we have the opportunity to teach them about investing for at least 10 years. The goal isn’t just to hand them money. It’s to teach them what the money is doing and why it matters. Every market correction becomes a lesson. Every new contribution is a conversation.
New Financial Goals For Each Child
If I can average a $20,000 a year of contribution for the next 10 years and my kids accounts grow by 8% a year, their custodial investment accounts could conceivably grow to $657,000 by ages 15 and 18.
With fewer jobs for entry-level workers due to globalization and AI, it helps to have a financial insurance policy just in case they can’t find work. Cars, homes, aspirational careers, and having children all cost money. They might smartly skip college as well, if they can’t get grants and scholarships to make the return worthwhile.
This is a new challenge I’m willing to take on since my own personal finance challenge is almost over. Having more money is not going to make me more free. But helping them build financial security in the future, if they need it, gives me a worthy mission.
Save Your Children To Save Yourself In Retirement
You might not agree with creating generational wealth. However, financially insecure adult children become a financial burden on their parents.
The best retirement planning you can do isn’t just maxing out your own 401(k) and building an even larger taxable portfolio. It’s also giving your children the tools and the head start to stand on their own two feet.
Market corrections and crashes hurt our children less simply because they have less to lose. But if we handle those moments well, they become some of the most valuable financial education our kids will ever receive.
Real-time lessons in patience, perspective, and the long game that no classroom can teach. Real money hurts more when lost, which is exactly why using real money to invest is important.
Start Now, Even If It’s Just a Little
If you haven’t started investing for your children yet, don’t let the perfect be the enemy of the good. You don’t need to max out the gift tax limit on day one.
Open a custodial account. Invest $500. Set up a recurring $100 a month contribution, you won’t even notice the money is gone. Then there’s the free $1,000 in Trump Account money for kids born between January 1, 2025 and December 31, 2028. The most important thing is to start, because time is the one input you can never get back.
If the market is down, even better. You’re buying assets for someone who won’t need them for 15 or 20 years. That’s not something to stress about. That’s something to get excited about. Every correction enables children to catch up, even for just a little bit, as the world runs away.
Have a plan for deploying money at different drawdown levels. Talk to your kids about what’s happening in the market. Let them see the account balances go up and down. Give them a financial life that started before they were old enough to understand it, and the education to appreciate it once they are.
The 18 years your children are at home is the most underutilized wealth-building window most parents never think about. Let’s change that.
Readers, have you opened 529 plans, custodial investment accounts, or Roth IRAs for your children yet? How are you teaching your kids about personal finance so they can be more financially independent as adults?
Track Your Investments So You Can Invest More Confidently For Your Children
The easiest way to know how much to invest for your kids during a market correction is to know your own portfolio inside and out. That means understanding its asset allocation, income generation, and returns so you can deploy cash with conviction instead of fear. You can do that with Empower and its free investing tools.
Recently, I went to the post office to send out a dozen signed copies of my USA Today bestseller, Millionaire Milestones. If you’re interested in participating in the promotion, you can sign up for a free financial consultation with Empower. You can read about my experience and the instructions in this post.
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