This ONE Deposit Will Turn Your Kid Into A Millionaire
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- เผยแพร่เมื่อ 16 มี.ค. 2023
- What if you could turn your kid into a millionaire at retirement by simply making one deposit when they are born?
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@@evasanz3466 there have been a few sponsors, but it seems Erin is very selective and avoids over flooding with sponsors
Erin, I did not hear you mention taxes. The capital gains and dividends would be taxed every year. This would leave your figures off quite a bit. Instead figure what it would be if your child were to max out their Roth IRA every year starting when they first begin to work or have earned income. This would be a more exciting and realistic thing to talk about. Keep it up. You are beautiful.
Erin, this is Downer Dave. Lol. I was born March 11, 1958 so I just turned 65. And no, my parents did not deposit $1600 for me 65 years ago. They couldn’t. I remember going over their social security numbers and in the 1950’s my father was barely making $1,600 a year. They would have to put back a years worth of wages back then. Even $60 a month was half a months pay. The $7,000 needed now is easier for a couple now than it was back then. And even $7000 is not easy for my daughter that has two kids, two daycare payments, etc. But it is easier for for old granddad so you have given me the goal of $10,000 investment for my 1.5year old grandson and maybe $15,000 for my 5 year old granddaughter. Now, do I have to have a custodial or guardian account of some type? How would I open an account for them?
Glad to see you have a sponsor. Keep up the good work Erin. As I keep saying- I love your channel.
Very valid points! And I love your goal!!Custodial accounts are wonderful - any major brokerage house allows them, and would be able to walk you though the process. Custodial account will face tax consequences. A Roth IRA would allow the money to grow tax free. But would require you to hire your grandkids and pay them a wage. Their smiling faces might look mighty cute on some promotional material for your business though 😊
You have to consider the small possibility your grandchild will become an alcoholic/drug addict... what would a drug addict do with access to $$$$? Kill themselves faster.
You could set up a Roth for YOURSELF, then name your grandchild as a beneficiary so long as they are drug-free and not an alcoholic.
Subscribed!
That's Awesome, I'm calling my Mom right now as I was born in 1958, let's hope she made that move 😂😂😂
🤣 so was I and I'm not holding my breath.
@@scotthilligus4195 Well my Mom has confirmed, no money but she did say she loves me!!
😂
and you can't put a price on love 😂
@@ErinTalksMoney 😂😂😂😂
I did this calculation for my coworker when he bought his 19 year old a new car. I told him that car could have been his entire retirement account. Lol
Also on inflation, $1M will not be the same in 40, 50, 60 years but zero will always feel like zero.
Maybe he already put money aside for his kid's retirement.
Or just keep the money in your retirement account and leave it to them in your will/trust. I think it's better they don't see that money in their account. Many young people, that don't understand money, may see six or seven figures in their name and think they don't even need to contribute.
Sounds great but back then my Dad's salary was about that much for the entire year. He was supporting 2 kids....so I don't deny that it is true, I just don't know how many people could invest that much then or equivalent now.
Love your clear and concise videos, keep up the good work!
My parents bough a life insurance policy for me when I was born. If they had just purchased an index fund instead, I'd be wealthy. But when I die, someone will get (maybe) $10K.
I missed this six months ago but your most profound video. The essence of compound interest.
30K Let's GO baaaaby! congrats on the growth of your channel. killing it!
I made sure to grab a screen shot when it crossed that 30K mark! 🤗
I am conservative. I use 2-4% as my estimate of real return. A real return rate of 7% or more would be awesome!
I'd definitely invest early for my kids. The biggest expenses are a house and retirement. College is optional, you don't need to spend $20K on a wedding, you don't need to buy a new luxury SUV, and no, you don't "need" to have kids.
Count yourself lucky if someone helped you pay for any of the above.
You can look up Ben Franklin's 200 year investment of $10,000 into the bank of Boston. It matured in 1998 in the millions.
Thank you for this. Those numbers are amazing.
I love your videos. Thank you. You are so helpful. Your advise and comments are so informative. Your presentation is very pleasant and helpful. My wife and I are hooked. Keep it up. I have NEVER subscribed, not even Dave Ramsey! But you are the one. Thanks for being you. Perfect.
Thank you so much!!! :-)
I do think that being more-conservative with projections is smart, for the reasons which you specified, and the fact that the last sixty-five years have had incredible growth partially due to the advent of digital technologies, which I am not confident can be sustained or repeated. (I am not saying that it will not be so either, though - look at how the Industrial Revolution led straight into the modern world). Additionally, the U.S. is losing its hegemonic status, meaning that the U.S. economy is going to be, relatively speaking, on a down swing - but the timescale for that is on the order of decades or centuries.
All very great points! (I guess that means we all have to save a bit more 😂)
Hi Erin! Nice video! Although we should point out that in 1958 $1,600 would be 3 months of the average gross salary, so it would probably be harder than it seems today. 😎🏆
I can vouch for Ekster wallets. I have one just like this, and it's excellent!
Still shocked you don’t have more subscribers. Such a good channel. Long time subscriber here. 😊❤
Thank you so much!! 😊
This was pretty cool. Thanks😁
Glad you liked it!
Erin that was some great information! Now where can I get a good time machine?
Good video Erin. Question for ya, what kind of account would you set up for a godchild? I’ve heard utma, ugma as options.
I did this calculation for my nieces and was totally blown away.
Truthfully, with inflation, the principal has to be somewhere between 13 k$ and 80 k$ (depending on assumptions) in order to get them to millionaire status in real terms, but that still is not too difficult to achieve over the course of several years (even adjusting for some lost time) if we are assuming that the saving is for a single child. Multi-child families will, obviously, struggle more with this.
Love the way you think 🤔!
My niece is 13. I just explained compound interest to her mom last Friday because for her 13th birthday I couldn't decide what to give her, so I started a savings account for her at Ally bank so when she turns 16 she'll have some money to put towards a car. I'm contributing $15 a week to the account and I'm doing that for 3 years (or longer if she doesn't need the money for a car). My nephew is 5, so once my niece gets her money I'll start on his account.
That’s awesome 👏
@Alli’s Bookish Adventures.
I think I’m your long lost nephew. 😂
Smart young lady💯👍
I know this is just and example, but there was no way for someone to invest $1600 in the S&P500 in 1958. And if they did invest in one stock or even fund, the cost of purchasing would have been substantial. We don't always remember that cheap and accessible investing is relatively new. Anyhow, I'm not complaining about your example, just thinking how personal finance has changed is in 65 years.
That's true. It has become much easier for the average person to invest, especially with fractional shares.
Great video. However, the answer to your first question, sadly, is not always, "yes, I'd love to make my kid a millionaire." I work in the auto industry, and it still amazes me how many well paid people still don't contribute to a 401k plan, even enough to get the match!!!!
😢, it is sad that they don’t. There is new rule I believe that came out that the companies will be doing is automatic enroll into 401k starting at 1% until percentage goes to 10 percent then it stops. If the person doesn’t want the 401k than they have call hr to stop.
Incredible!!
Very unique calculation!
Gives food for thought!
For folks with no heirs, possibly a good way to jump start a young person(s) future life!
Hey Erin,
Thanks for your insightfulness, thoughtfulness and enthusiasm for personal finance. As you noted, that 1600.00 dollars investment in 1958 would be an equivalent investment of 16721.00 dollars approximately today due to inflation. Even if a family couldn't afford to do that total amount today, any amount that one could start with would be a valuable and wise investment.
This reminds me of the old maxim of taking a penny on day one and double it on day two. Continue doubling the amount each successive day and you will amass an incredible amount of money.
The power of compounding in finance and in each other are both worthwhile. Take care...
cool info….
Another awesome video, Erin! TY
Since my kids are 16, 18 and 20 it's too late.
Maybe my wife and I can be like your Mom and do this for our future grand babies once they grace us with their presence.
The best time to plant a tree was 20 years ago, the second best time is now. $1,600 is still worth between $100,000-$200000 among your kids and it will take of the pressure of having to set aside 15% of their paycheck.
Not really.
Your right ✅️ 👌
Another great video Erin. This is something I strongly believe. That if parents have the means should definitely do! I've been doing something similar but on a monthly basis. I've been investing $100 a month in a total market fund (of course reinvesting those dividends and capital gain) for my son and will continue to do so and then stop once he's able to contribute to it himself. Give him a good head start on his Roth IRA. Keep up the great work.
First one Erin! And I love the money guys too!
How much taxes would you pay for the 65 years on the dividends? I like the returns, but the cost to get there should be reported as well.
Personally I would put it in a Roth IRA for my kiddo - hire them, pay them enough to fund the Roth, the let it grow tax free
@@ErinTalksMoney Can you explain this more or do a video on this?
Will do 😊
This is a cool video and fun to think about. I would rather think about setting my son up for when he is 30 than 65 though. With good financial management, 65 year olds should be debt free and comfortable heading into retirement. I would rather contribute to a time that is harder to feel secure when my son might consider buying a house, getting married, and having kids.
tell your husband thanks for his service! thanks for the info.
Hey Erin thank you so much for talking about this I've been thinking about this for years. Question where would you suggest the best place to put that money would be? Obviously it needs to be easy and hands-free as much as possible until they are older than they can decide for themselves. Like a fidelity low-cost managed account of some sort?
Paul Merriman has a couple interesting podcasts about this idea on his Sound Investing podcast. He is investing $10,000 for his grandkids when they are born. He figures his 2 fund strategy of total market index funds with small cap value funds can earn an average of something like 12% per year so he thinks this $10k will turn into a couple million in present value by the time they retire. I want to do the same thing one day but I will probably do mostly total market index funds with maybe 20% small cap value so I figure I’ll need to do $25k per grandkid to take care of their retirement. That should put them at coast FI when they are born hopefully. Then the idea is to move the money from a non qualified taxable brokerage account to a Roth IRA account as they start making earned income as teenagers. That money could potentially fund their Roth IRA soft most of their lives.
I thought about doing this for both of my kids, but then realized I doubt they would hold that when I pass. As I won't be around when they retire...They probably would cash that out.
I get that!
@@ErinTalksMoney it would be good if you could force them to not touch until retirement but that would be hard to enforce
You would have to put it in a trust with an Law firm to manage it.
@@bryanwhitton1784 Yeah, I thought about that after I wrote it
Also wondered about tax implications on that. Would love for it to be a Roth account but I know they have to be working first is that correct?
@@KayKay0314 Our son made exactly $6000 last year modeling for out company's promotional material. Cute kiddo.
I like John’s comment - you can always hire your kiddo and pay then just enough to find a Roth (that’s my plan) 😊otherwise, traditional brokerage, custodial account - index funds would lessen the annual tax burden. Definitely would be capital gains when withdrawals are make though!!
I'm getting the cash right now for each of my young kids, what brokerage will let me set up an account for a young child and what ETF or index should I buy? Yes I know accounts can loose value and blah blah blah. I accept all risk for this decision, just let me know where and how I can do it please because I'm willing to take this gamble, even with inflation and everything else. Your help is appreciated.
Don’t like advertisements in videos, google already adds ads that make me question if it’s too many. Additional ads make content unbearable.
Pleb
Banks and brokerages like to confiscate accounts/funds that are left alone, untouched for 10 yrs. Hard to imagine an account sitting inactive for 65 years.
Make a $1 deposit once a year and that account will be considered active 😂
@@ErinTalksMoney There you go. Have to keep that in mind for 65 yrs as long as no dementia or not dead.....lol just kidding
Hopefully you will continue to invest new funds into the account.
Discussing nominal returns without adjusting for inflation is a bit misleading. The long term real return on the S&P 500 is about 6.6%. Your point is great but I would suggest using 5.5% to 6% rather than 7% for a realistic calculation that one can relate to in today’s price levels.
Awesome! I love that you're thinking generationally. I just opened an investment account for my teenage son. We just put the same amount in every month and I show him how it's doing every few months and I drill in the basics, "Don't touch it. We'll just keep contributing. You'll take it over when you get a job. Let it grow. And when you're ready to retire, I'll be there."
Plus, this is just one of many possible long-term investments he could make. This doesn't include any 401k he has access to, an IRA, buy-and-hold real estate, etc. And if I'm blessed to be alive when he has his own kids, I'll do exactly what you're mom said she's going to do with her grandkids.
I’m so happy to hear you opened an account for your son! I feel like kids are never more interested or learn more when they feel like it’s theirs!
@@ErinTalksMoney Yeah, and when he's ready to retire and I'm long gone, maybe he'll say to himself, "Well, I guess that old man really did know what he was talking about!" Ha.
I dont see a link for the wallet.
Should be in the pinned comment 😊
Investing $15,800 today will turn into 7.75 million in 65 years, which is equivalent to 1 million dollars today with a 3.2% inflation rate.
Investing $13,928.21 today will turn into 6.83 million in 65 years, which is equivalent to 1 million dollars today with a 3.0% inflation rate.
Basically, just try to invest, especially if you’ve got kids.
That's was gonna be my question... what'll 1M be worth in 65 years? probably not enough to live off of.
Starbucks: $3.50/day=$70/month@8%=$1.6M
Fast food every day: $20/day=$600/month(including weekends)@8%=$13.8M
Netflix Basic instead of Premium: $10/month@8%=$230K
I’ve always been careful to manage my recurring costs. It seems to work for me. Of course, the most important thing is your health.
What about paying the taxes all those years?
I have been investing $150/month for my daughter since she was 4 months and will keep doing it. Hope she will use that money for something good in the future
Thanks for discussing. My kids are now 21 and 18, so my focus for them is to teach at this age. The power of them starting at this age is incredible. My son graduates this fall from college with 9kplus in a Roth and completely debt free. I’ve in graded in his head 15% savings into index market funds. I believe his habits he’s developed theu his college career has him on his way. My daughter starts college in the fall so hopefully the plan will be the same for her. Of course she has her brother to watch and to see the success he has had. But I hope to do what you discussed with my grandkids, but I agree with you at the end. They need to be taught at a young age about money, money habits, and compounding growth. Hopefully that ignites a fire to continue adding to the great start. I like to use 9% so I’m thinking $3500 to start with them taking over to grow it when the time comes. Thanks!!!
That’s so awesome!!! 👏👏 I’m so glad they are starting so young!! Good habits are the foundation of everything!
Even better consider diversifying to other asset class. $1600 in US Small Cap Value from 1972 until today would have also made you a millionaire. 👍
This is such an intriguing idea and I'd love to see more exploration of the topic! In many ways, this is like a personal implementation of the "Baby Bonds" idea that's been batted around more generally right?
I know the magic of compound interest is the core mechanic behind this, but I like the idea of planning for how to give your kid a "leg up" financially. Would this be a form of generational wealth? Would this be giving them the financial "privilege" we may not have had personally growing up? (kiddy condos, for example? Or parent-gifted house downpayments?)
Also, how do these figures change shape if your time horizon is 18 years to save just enough for college? Or maybe 30 years for a house downpayment? Or what if we wanted to make them a millionaire by 50 instead of 67?
I'll definitely have more videos on these topics 😊
It's definitely important to get that compounding ball rolling early. However, 1MM might not mean much in the future if America turns into Weimarica at some point lol
Also, I’m thinking I’ll take pictures of my Grand Kids in my Rental Houses so I can put it in a ROTH!
Yes, I’ve thought of this too!
I wonder what the management fees would be over 65 years. I'm sure it's not negligible.
There are accounts with no fees when you maintain a minimum, like Vanguard.
That’s why I like index funds 😊
@@carolynl5445 How does Vanguard make their money on those accounts?
@@ErinTalksMoney I hear you... I have some of my 401K in short term bonds. It actually got a bump recently when others started piling into short term bonds, but the management fees are MUCH higher than index funds. It pains me to eat them!
Well the other thing is that inflation goes the other way as well. $500 would have represented a very large portion of someones income back in the 1950's.
$1 Million in 65 years with a Lump Sum Deposit of $7,000. Question: With inflation over 65 years, what would $1 Million in 65 years be worth in today's dollars? Assume a 3% rate of inflation.
Imagine being on the west coast instead of back home and pulling into the base to go to a commissary. “I don’t have my wallet” 🤦♂️🤦♂️🤦♂️🤦♂️🤦♂️. My Granpa lost his mind at my dumb uncle 🤣🤣
🤣
Interesting math
They will be a millionare.
But that million dollars will only be worth about 200k in purchasing power due to inflation over 60 years
Cool. I may do something like this for my step grandkids. What if they get crazy and spend it all on good whisky and bad women? You can't fix stupid.
In 1958 you could buy a house for $1600.
Probably depends on the home and the region, but median home in the US in 1958 was about $19,400
What will $1 million be worth in 65 years? Probably not what it sounds like.
Even better, put it in a Trust they can’t get the money until they are 60 (that’s my age choice!)
I guarantee my parents didn't invest $2K for me when I was born. They wouldn't have saved that much money and not spend it for themselves, and if they did they would have taken out most if not all of it today to fund their current lifestyle.
By the time a kid born today turns 65 a million dollars will probably buy, maybe, groceries for a couple years! Even today a million isn't that much. Remember when "ol' Jed" became a millionaire? Back then it meant something. Today you need a billion to be what it was like to have a million in the early sixties! Now think 65 years into the future! That's the biggest problem with saving for retirement. Wherever you think the goalpost is, it will move farther and farther away every year. That's why, no matter how well off you are when you retire, very few are quite as well off as they thought they would be. We need to stop thinking in terms of "millionaire" as a goal, and start thinking billionaire.
The real issue here is that you can't open a Roth for someone that doesn't have earned income. Otherwise I'd put a couple grand in a Roth and give them a tax free million for retirement.
You can start a 529 plan for your kids or grandchildren. A great education is a worthwhile investment.
@@jamesodell3064 yeah I have the 529 already. Roth would be convenient though as it's tax free retirement.
Idea: Open a Roth for yourself, but it's "really" for Jane Junior... you can own as many Roth IRAs as you want.