Setting Your Kid Up To Be Wealthy
A family friend just gave birth to a baby girl named Cynthia.
Instead of gifting Cynthia new baby clothes or other random stuff people give newly born babies, I gave our family friend some money and helped her open up a Wealthfront account for Cynthia.
Wealthfront is a robo-advisor investment company built for millenials (and anyone who comes after millennials).
You don’t deal with humans so there’s no sleazy salesman you have to deal with.
It’s all done via the Wealthfront app.
And I say it’s built for millennials because that’s how they market themselves.
Everything is done via a snazzy easy to use app on your phone, or desktop, and not clunky and outdated website ike other investment websites from companies started decades ago.
I told my friend straight up, “If you put $100 into Cynthia’s investments every week, by the time she’s 18, you’ll have only put in $93,600, but she’ll have about $200,000 to $300,000.
Here’s The Math
I’m not kidding.
It’s math that our brains can’t usually fathom because of the scope of time it takes for compound interest to accumulate, plus the fact that it only takes $100 a week to reach that amount of money.
We’ll break down the details from the screenshot of the compound interest calculator shown above.
Assume you start off with a $500 investment into Wealthfront (it requires that much for an initial opening).
You then set up an automatic investment of $100 a week to be invested into your kid’s Wealthfront account (because Wealthfront requires investments in increments of $100).
For 52 weeks a year, that’s $5,200 invested.
Assume a conservative average of 6% returns a year (even though during this current bull market, stocks have been averaging something like 7-10% a year).
Then assuming you invested the moment your baby is born when they get a social security number, till when they turn 18, you’d have approximately $180,000.
However, Your Child Can Be Even Wealthier
Those numbers were only factoring in $100/week for 18 years.
I’m assuming that during those 18 years, your income will go up and you can increase the amount of weekly money invested into your child’s Wealthfront.
Not only that, if both parents are able to contribute more than $100/week, than the numbers only go up from there.
If both parents chip in $100, that’s $200 total per week.
The child would have around $350,000 by the time they’re 18 years old.
And that’s factoring in a conservative 6% growth per year, not including dividend reinvestments.
Your Child Can Also Add Their Own Income
In New York growing up, you had to be 14 years old to get a “work permit” signed by your high school guidance counselor saying your grades were good enough to work.
So between 14 years old and 18 years old, your child can find a job and help put away some of that money into their Wealthfront, while you’re keeping your contributions.
Not to mention, between the ages of 6 years old (or whenever they’re old enough to start doing chores/help around the neighborhood) and 14 years old, they can help do odd jobs around the neighborhood for side hustle money.
Growing up, these jobs were usually mowing neighbors’ lawns in the summer, raking leaves in the fall, and shoveling snow in the winter.
Instead of teaching your kid to trade their time for money, teach them about passive income generating hustles like creating a blog, vlog, Etsy printables, music, writing books, or anything else that they create once and make royalties or earn interest from it going forward.
Either way, between adolescence and during their teenage years, they can earn money and add to their Wealthfront as well.
If the parents increase their contributions as they make more income, and the kid adds their contribution as they make more income, the kid can literally have a Wealthfront account worth almost $500,000 by the time they turn 18 years old.
Which isn’t too shabby.
While it might seem daunting, you can do it.
If you just had a kid, or know someone who just had a kid, share this article with them.
If both parents start by contributing $50 per person per week, you can reach the $100 a week threshold to invest and make sure your kid is on the way to being rich by the time they’re 18.
And because at a 6% growth rate, the investment will double in about 12 years.
This means that if you and your kid can get to about $500,000 by the time they’re 18, you and your kid could literally not invest a single dollar after they turn 18 and by the time they’re 30, they can have about $1 million.
They’d essentially have reached financial independence all because you helped them from the moment they’re born.
Not to mention, it will set them up on a stronger financial footing than probably most kids their age.
Your kid can be rich.
Your kid can have a bright financial future.
You just have to start and lay the foundation for them.
Read this post on why it’s better to have a Wealthfront for your kid versus a 529 college plan
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