Smart Reasons to Save, Use and Invest Money

Giving My Kids A Head Start In Building Wealth

I would like for my son and daughter to have a shot at becoming wealthy when they are older!

So what is a middle income earner like me to do?

My “Work in Process” Plan

Basically to contribute $2,000 per kid until they are 21, then hope they build upon the base that I created for them.

Here is the basic calculations table that I created to help them:

AgeAmountInt. RateInterest Earned
6$2,000.000.06$120.00
7$4,120.000.06$247.20
8$6,367.200.06$382.03
9$8,749.230.06$524.95
10$11,274.190.06$676.45
11$13,950.640.06$837.04
12$16,787.680.06$1,007.26
13$19,794.940.06$1,187.70
14$22,982.630.06$1,378.96
15$26,361.590.06$1,581.70
16$29,943.290.06$1,796.60
17$33,739.880.06$2,024.39
18$37,764.280.06$2,265.86
19$42,030.130.06$2,521.81
20$46,551.940.06$2,793.12
21$51,345.060.06$3,080.70
22$56,425.760.04$2,257.03

Now I know some of you might be thinking big deal, 56k isn’t that much.  And you would be right.  But it’s not a bad chunk of change either!

I would hope that they continue to build it, but if they don’t, at least that would be a great down payment on a house.

Another option would be to keep the money for them and let them draw a little at a time.  This would be messy and my kids might start to build a dependency on me.  I don’t want that to happen.

I have to admit, another part of me just want to sock  extra $2,ooo a year into my account and let that  amount grow!  Just to see what it does!

Either way, I’ve alread started it, and so the numbers that go to age 10 has already been accomplished.

This is still a “WIP” task, I’ll update this in a future report.

-MR

22 Responses to Giving My Kids A Head Start In Building Wealth

  1. What you are doing is remarkable. Without adding another penny, if that nest egg continues to grow at the projected 6% until age 67 — the current U.S. “full retirement” age — that $56,425.76 will become $776,678.63 . No, that’s not a fortune, but it is a giant head start toward a comfortable retirement!

  2. @Jane
    Thanks, once they turn 22 and if they get a job, I’m hoping they’ll start to funnel of the money I saved for them into a Roth IRA. That way the money will grow tax free!

    We’ll see…

    $4,000 a year isn’t easy for me, so I don’t know if I’ll do it much longer or not. I’m hoping this blog will help with a portion of the money… I guess I am doing this blog for money reasons 🙂

  3. I am impressed that you are able to do this. I am sure with guidance, they will be able to use this money to do incredible things….

  4. It’s admirable of you to do this for them. However, have you read The Millionaire Next Door? Specifically the “Economic Outpatient Care” chapter? It talks about giving kids too much monetary support and the possible negative effects. Sometimes being “hungry” is a great motivator to becoming financially independent. However, that being said, as long as you discuss finances openly with them, how you budget your money and save a portion of your income in a savings account, kids seem to learn terrific financial lessons through parents’ actions. Just a thought! 😉

  5. Money Reasons, that is a very nice thing to do. But, don’t hurt yourself to attain this goal. The one thing I have learned is to enjoy the ‘now’ as much as possible. In other words, don’t beat yourself up if you have to stop contributing to pay for something else.

    You are a very nice dad! 🙂

  6. @Mysti
    I’m hoping! I’m not entirely sure when I should start training them. Actually I need to learn a bit more myself before I start teaching them.

  7. @Little House
    After reading “The millionaires next door”, I’m very familar with “Economic Outpatient Care” content. But I counter this by them not knowing how much they have.

    I’m planning on telling them about the money after they graduate. The money will be a gift, but also a starting point to build upon (especially, if I train them correctly).

  8. @everyday tips
    Thanks, I try to be the best dad that I can 🙂

    I have to admit, I’m been going back and forth on additional college contributions or putting additional money in their brokerage account.

  9. Moneyreasons, I think that is very commendable what you are doing for your kids. Are you doing anything special to set aside this money? Is it in a separate account or just earmarked in your own account? Any type of tax sheltered plan like a 529? Just curious as I’m entering the planning stage for similar activities myself.

  10. @Car Negotiation Coach
    I have a UMGA brokerage account that I pump the money into. But I also have a 529 plan for college that I’ve been putting money into since my kids were 3 years old or younger.

  11. I think you are a very sweet dad. My parents help out when they feel like it (they bought all our appliances when we moved into our new house for $2200, but they also tried to charge me rent on a car…I have a weird family), but this is above and beyond. Wow.

  12. @Budgeting in the Fun Stuff
    I’m hoping that by the time I give them the money, they will have developed an idea about creating a passive income stream.

    I’ve just started trying to educate my son lately. He like numbers and is good with money. We’ll see if what I’m doing is a good or very bad idea. I know if after he gains control of the money, he comes to visit in some fancy car…

  13. I think this is a much better idea than what a lot of parents do (private school fees). They should be able buy a house straight out of college. My grandfather did this for me I got $5000 when I gratuated from high school. I put it straight into stocks and kept buying some more every time i had some spare cash from working part time. 2 years out of college I bought my first house. I’m not super rich but i’m better off than alot of my peers

  14. @Benjamin Bankruptcy
    Your grandfather sounds pretty wise! I hope to do the same for my kids.

    Where I live, the private schools really don’t carry much weight, so I figure why waste the money… Especially when the public school in my city is rated Excellent already…

  15. What you are doing is AMAZING. Like Jane said, that $55,000 can turn into over 3/4 of a million by the time they retire. You are giving your kids a tremendous gift and a head start in life. They will never forget it.

  16. @WellHeeledBlog
    Thanks 🙂

    I’ve been pretty good with the plan so far, but I’m honestly thinking about redirecting some of that money into their 529 plans instead.