Can I Make My Kid a Millionaire?

Like every woman, I am a fan of Pinterest. Cute little pins, especially financial ones have increased my savings by about 90%. One of those little pins says “How to Save $5000 for your Disney Trip by next year” It has a weekly deposit amount for a year and at the end of the year, you should have $5,512.00 added up. Another similar pin is from Dave Ramsey. It shows how two people can invest at different times in their lives, one from 18-24 and one from 24-65. The one at 18 invests $2000 for eight years and then leaves that money to accrue until he is ready to retire, then he will have so many millions for his retirement. The other has to scramble to catch up when he starts investing at age 24. So I put these two ideas together.

If I take my little Disney chart and change it to just $2000 a year, I will put into savings every week $64, then $63, then $62, all the way down to $13 in the 52nd week, I will save him $2002 a year. Each year, if I invest that $2002 until he is 18, he will never have to invest a dime of his own money. If he doesn’t touch it until he’s ready to retire, he’ll have somewhere along 5.9 million, assuming Dave’s rate of 12% returns (he invests in mutual funds almost solely). As discussed before, it’s hard to get that 12% rate, but not impossible. Either way, I’m spending very little of my own money to help my son. Now when discussing this with him, he informed me by the time he’s 65, he won’t need 5.9 million dollars, but stated he could, instead, add to my investment his own $2002 a year until he’s 24, then just retire in his late 30’s. I say that’s quite a genius idea!

So I wondered though, what if the market doesn’t ever recuperate from it’s poor rate of returns, what then will his money do? Is it worth it?  Well, it depends on your idea of worth, but it wouldn’t make him a millionaire. But from what I read, 12% is still a completely doable number in the world of mutual funds, and even Lending Club and Prosper apparently, so I’m going to give it a shot.

My bigger concern is when he turns 18, will he be financially responsible enough not to withdraw it all and go buy a motorcycle with it? Or when he’s 28 and his wife wants to take it out for something stupid, will I have taught him enough financially that he tells her no? I guess the real investment is in him, not any market; and teaching fiscal responsibility, well, isn’t that worth a million bucks in and of itself?

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Shout it from the Rooftops!

Last month, I paid off my Lending Club loan. This means I am debt free, minus my mortgage, (but that mortgage was the best purchase ever!) But when you can say the words debt free, you should shout it from the rooftops! You should do a happy dance; post it on social media; throw a party; even put a sign in your front yard if you want! I thought about putting a flag up. Wouldn’t that be something? Driving down the road and see a flag flying in someone’s yard that says “Debt free”? Now there are some that would say, “You’re not really debt free, you still have a mortgage”, but they are party poopers and they aren’t invited to my party. Currently I have a plan for that pesky mortgage too. I have a mortgage with a nice fixed rate, a very low payment and a bazillion years before I pay it off. It’s the standard, run of the mill, every American has one loan, but my mortgage company is awesome! I use Quicken loans and they rock! Some mortgage companies penalize you for paying your mortgage off faster, but not them. No sir! They want to help you help them get paid. They just started offering the bi-weekly payment plan, which if you know me, you know I love bi-weekly payments. That is how I paid off both of my vehicles early and saved tons on interest. So instead of paying 12 payments a year, you actually pay 26 half payments, which is like paying an extra payment a year. Quicken has this cool like amortization calculator where you can crunch your numbers and see how much interest you’ll save on your loan and how many years you knock off. So this is something I have learned playing with my numbers. Since I am use to living without my lending club loan payment, I can actually put it toward my mortgage. If I do that, I will pay my home off in ten years and save a little over $50,000 in interest. That’s amazing! My mom once told me to never give people real money. She said, you don’t know if you’ll still be living there in 30 years, so why give them any more on the loan than what you have to? Well, I’ve got to live somewhere, and how’s this for a kicker – if I pay my mortgage off in ten years and then I have to move in 11 years, I can sell my house and buy my next house with cash, or even get a bigger house with a HUGE down payment, like 50 or 80% down payment. So while my mom has a point with her advice, I like my idea better. It is true what they say, your world opens up without any debt. Or if “they” don’t say that, I said it and it’s true!