Would you like to give a gift of $10M to your kids? Here is something each one of us can easily do. Give a dollar a day to your kid and have them save in their piggy bank. On their birthday every year, have them invest that $365 in an Index fund (ex. SCHB). If your Kid does that consistently every year for the rest of their life, they will have accumulated $10M+ by the age of 72!
Instead of a dollar, if you can afford to gift $10 a day, that will turnout to be $100M+ when they retire!! As per the Rule of 72, money doubles every 6 years assuming an annualized rate of return of 12%. Essentially, money will double 12 times by the time they retire. This is the power of compounding! Following are additional benefits of this strategy:
1. Retirement Secured! Social Security is expected to collapse by 2036 so this is a great way to roll up your sleeves and take retirement security in your own hands.
2. Inculcate great Savings/Investment habits for your Kids.
3. College funding: By the time they are ready to go to college, money will double 3 times as they turn 18! Essentially, they would have contributed $6570 and rake in $23K!! If you can afford to contribute $10/day then you will have a whopping 230K for their higher education expenses! (Make sure you tell them to put this in their College essay, who knows some great college might get impressed!)
My personal preference is not to wait till the birthday to invest. When the Kid has enough to buy one single share of SCHB, dump it into the Markets. Don’t worry about timing the Markets. Consistency and Discipline is the key and DCA (Dollar Cost Averaging) will do its trick! This is a very powerful lesson that you will teach your Kids – an INVALUABLE gift of a life time!