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?