The Strategies of the “Happy Investor” and How He Builds Wealth for Generations

When Ange Matthews started her first full-time position as an associate recruiter in 2007, she earned $40,000. Ending 2007-09 during the recession, “It was really hard to find a job,” Matthews says. After several months of searching, he accepted “the best option available”.

While he was living in his mom’s basement in New York City, Matthews calculated how long it would take to get promoted and pay off his student loans with his current salary.

“I’d have to work here for 10 years to get to $50,000,” he says, referring to the salary he could earn in his current role.

That’s when Matthews realized he had to do something else. He started investing in 2008 and today is an investment coach in Dallas. This is what Matthews is doing to create generational wealth for her children, family and community.

What inspired Matthews to start building generational wealth?

After graduating, Matthews realized he needed a way to make more money, as well as personal finance and investment skills to grow his wealth.

Already working 60 to 70 hours a week, performing part-time on top of her full-time job was out of the question. She initially built up by making and selling jewelry in New York City markets, but eventually wanted to harness the power of investment and compound interest.

Compound interest is made up of both the money you earn on your savings or investments and the money you receive from those earnings. In other words, says Matthews, “your money goes back with friends.”

To get started, Matthews created her first budget and created an income-based repayment plan for her student loans. At the time, student loan interest rates were less than the average yield on the S&P 500 SPX,
+1.30%.
So he saved money by making a reduced payment and then investing the savings.

Matthews also realized she was comfortable living with a smaller emergency fund if it meant she could start investing. Creating a plan for her money allowed Matthews to make enthusiastic progress toward her goals, slowly reducing her educational debt and investing in her family’s wealth. She ended up using the money in her brokerage accounts for a down payment on a house and her parent’s care.

Matthews encourages people to think about who they want to help and whether that help will come from wages, savings or investments. Assets with monetary value, from stocks and bonds to real estate, life insurance and retirement accounts, can be passed down as wealth between generations. Matthews calls generational wealth “100-year money,” or money that helps provide for your children, your children’s children, or someone important in your life.

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What is the happy investor method?

Getting started with budgeting and investing can feel overwhelming, especially if you’re overwhelmed by the financial system or have experienced generational or financial trauma.

“When people think about money, personal finance and financial empowerment, and investing, it’s really disempowering,” Matthews says.

Matthews says one way to avoid feeling overwhelmed is to focus on what motivates you. His Happy Investor Method focuses on identifying money goals that spark your joy. He also suggests reframing those goals in terms of how you make a difference in your life and in your community. A desire to invest on behalf of a loved one to eventually pass on wealth can be a strong motivation to get started.

She emphasizes that the joyful approach is not about cutting out that latte, living without joys or pleasures, or reducing the quality of life. Instead, he wants the process to be engaging and motivating, if not fun.

“The criteria for success is not necessarily being a multi-millionaire,” Matthews says. “We want to make sure we are who we hope to be on the other side” of the financial decision.

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What strategies did Matthews use to build savings for her children?

Making those 100-year money goals a reality is especially important to Matthews now that she’s the parent of a 2-year-old and a 5-year-old. His approach to investing for his children is to invest passively through custodial investment accounts.

Passive investment

Passive investing involves buying securities that reflect stock market indexes and holding them for the long term. Matthews puts his money in index or exchange-traded funds that track the stock market. That way, Matthews says, “your money grows with or without your daily engagement.” Passive investing is a lower maintenance and riskier strategy than active investing, which involves researching, buying and selling individual stocks to beat the market.

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Custody Brokerage and Retirement Accounts

Matthews puts her passive investing approach to work by opening and funding custodial investment accounts for her children.

A custodial brokerage account is an investment account that an adult can open on behalf of a child, who can access the account when they turn 18 or 21, depending on the state. Custodial brokerage accounts, also called UGMA or UTMA accounts, are considered taxable brokerage accounts under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act.

According to the US Social Security Administration, “This law allows donors to make gifts to minors that are tax-free.” That is, adults can make tax-free contributions to a UGMA or UTMA account up to the IRS gift limit or $17,000 in 2023. Funds invested in these accounts can be withdrawn at any time without penalty.

Matthews intends for the funds in his children’s brokerage accounts to be used for their life-changing experiences; funds are not intended for retirement or education.

Custodial retirement accounts, such as a custodial IRA or Roth IRA, are owned by the minor, but the adult manages the account and all of its assets. If your child has earned income, say through babysitting, retail work, or lawn mowing, a custodial retirement account is another option for building generational wealth, and it comes with special tax advantages. For example, contributions to a Roth IRA are made after-tax and grow tax-free.

Custodial accounts can be a good way to introduce children to the concept of money and help them begin to follow the market. To get her kids excited about investing, Matthews takes a step away from her passive investing strategy. It’s intentional and brings joy to all of them.

And most importantly, Matthews says, “we make it really fun and light for them.”

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Alieza Durana writes for NerdWallet. Email: adurana@nerdwallet.com.