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TSI #11: Make your child a Millionaire... Before 60 years old

Aug 28, 2022

Making your child retire a Millionaire is quite easy.

  1. You invest $40 / month on the behalf of your child into an S&P500 fund

  2. When the child is 18, you stop contributions. The fund value will be $8,640 at that point.

  3. You let the investment compound in value.

  4. Based on the historical return of the S&P500, at age 61 your child will inherit $1,318,474.

That seems great... But is it really?

There are two big problems with this approach:

 

Problem #1: Inflation will eat up the investment value

The portfolio nominal value will be $1,318,474.

This means that on paper your child will actually be a Millionaire but... Because of inflation he will be able to buy much less.

More precisely: assuming a 2% inflation annual rate, the actual value of the portfolio will be $388,857.

Better than nothing... But not nearly enough to retire well!

 

Problem #2: receiving money at 61 is cool, but it won't change the course of your life

Here is a bit more of a personal take, but I feel that inheriting a big chunk of money close to the traditional retirement age will definitely help your child secure his retirement funds...

But aside from that it would be too late to use the money for anything else.

What if we shift the purpose of investing for our children?

Let me share a personal story with you.

Being in my late twenties, I struggled with financial instability since I graduated from university.

I never had real issues to pay rent at the end of the month or cover other expenses.

Still, I had this fear inside of me that I needed to receive my salary every month.

The idea that I was not self sufficient and didn't have enough savings chained me to my 9-5 job.

I was always thinking:

Once I will have enough savings, I will build my business.

Or:

I need more financial safety, then I can follow my passions.

It took me 3 years of working full time to realize that life was going much faster than I anticipated.

That I was already trapped in a 9-5 cycle without realizing.

That I was approaching 30 years old at super fast speed.

Having some personal funds would have helped me to pursue what I love much earlier.

So here is my alternative to make your child a Millionaire.

 

It is better to live rich than to die rich

What if we shift the purpose of investing for our children?

Instead of considering as an amount to make their retirement safe, we can make it a fund to help them realize their aspirations... a Dream Fund.

According to the Federal Reserve, the average savings for people under 35 is $11,200.

Such an amount won't support a young person to take risks and pursue what they really want in life.

They will be stuck to pay the next bill, the next loan, the next vacation... Until they find themselves stuck in a never-ending cycle.

The good news is that as parent you can actually break this cycle.

So let's make some calculations, and see how we can help our children to reach their dream goals.

Assuming you invest $100/month from age 0 to 30, you will have $228,032 in your investment account.

Once we account for inflation, the real value will be $150,129.

This amount is more than 13x the savings for the average under 35 years old!

What's crazy is that anyone can achieve this result without using complex strategies.

Some may argue that $150k is not life-changing money.

And in some way it's true.

However, we should consider the $150k as a nest egg to help our children to push for their dreams.

So that they don't need to worry for the next bill coming in!

To me, that's the way to help them become themselves Millionaires.

Not by giving them the solution already.

But by giving them a head start to build that Million for themselves.

 

So two questions for you, Stoic Investors:

  • Would you prefer to receive $150k at 30 years old or $388k at 61 years old?

  • If you are a parent, would you agree with this approach? What would you do different?

 

TL;DR

  • Stop aiming to make your children millionaires when they will be too old

  • Instead, build up a Dream Fund to help them chase their dream job, business or passion when they are still very young

  • To let your children inherit $150k at the age of 30 y.o., you need to invest $100/month into a global and safe ETF


 

See you again next week.

 

Whenever you're ready, here is how I can help you:

1. Take advantage of all our Free Resources and start your journey as Stoic Investor 

2. Book a Free Consultation to ask your investing questions and we will point you in the right direction

3. Watch hundreds of Video Testimonials of Stoic Money Clients from 25 different countries

About Me

I am Vittorio Rigato, the Investing Coach behind Stoic Money.

I invested for more than 8 years, both for myself and by managing the 7-figures retirement account of my family.

After my¬†Master Degree in¬†Finance & Management,¬†I worked in the FinTech industry in Frankfurt (Germany) and managed financial products with value up to ‚ā¨100 Millions.

In 2021 I have founded Stoic Money to teach employees and professionals worldwide how to invest to reach $1,000,000 Net Worth and beyond. Many of them reviewed Stoic Money service with a video testimonial here.

Multiple Finance News Websites like Yahoo Finance and Euronews talked about Stoic Money mission and services.

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