An article in Directory of Madison says Your Child Could Be a Millionaire. I agree and would go a step further and say your child must be a millionaire and must be nearly a $100,000-aire by age 18. $200 a month over a child’s life at an 8.4% return will be $100,000 by age 18. $100,000 is not a lot of money. $100,000 plus continued monthly contributions will pay for a medium-priced undergrad education. If your child doesn’t go to college or gets a scholarship, that money can pay for their first home. Having that will make it easier for an adult child to save for retirement, which will require more than a million dollars.
If you accept that a comfortable retirement costs more than a million dollars, you have to start out saying my child will be a millionaire. The only other option is to teach them to manage the condition of having no money. Knowing how to operate with little or no net worth is a good skill to have. People should never, IMHO, consider living broke to be their primary path. The primary plan has to be having a reasonable net worth available to take advantage of business opportunities, handle emergencies, and help others. The plan should include ways to transfer some of that wealth to children so they don’t have too many opportunities in life to use their skills at living life with no money.
None of this is to say child must become rich. This is saying they must have resources to manage life’s ups and downs, and having a million dollar net worth or more is one part of doing that.
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As a relatively recent grad, I can personally attest to managing life with limited funds. My masters degree alone put me $72K in the red, so I figured it is best to plan, budget, save, and find a way to enjoy life. I think having a lot of money you didn't earn at a young age is probably more detrimental to personal growth because I think it would lead to a lack of financial responsibility. Kudos to those who become millionaires at 18. I'm not gonna lie, I'm a little jealous =)
ReplyDelete@The Law
ReplyDeleteIf you do monthly and yearly plans, you'll blow away that $72k in less time than it took to finish your degrees. So many people just operate as if you should have no money, but they end up panicking every few years when there's a recession.
I am not shooting for my baby to be a millionaire by age 18, but I do want him to be a 100k-aire, so he can get some good degrees w/o going into the hole.
I finished school with a little debt too, and it probably took me longer than it should have to pay off. My suggestion is either to pay it off fast or build up wealth in conservative investments fast, so being in the hole isn't this annoying thing hanging over you eight years from now.
It's much easier to save once your basic needs are met. The upper middle class can have these sorts of expectations. Would such a class even exist in a just society?
ReplyDeleteMost American children will not be millionaires. The postwar position of US hegemony is long gone. We are approaching world norms. This will make it even harder for most Americans to have savings for their decedents. Overall this is a net plus for humanity....but for those expecting six or seven figures net worth at early adulthood--they'll be in for a big surprise.