Your Child Could Be A Millionaire
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Now I realize everything has gone to hell in a hand basket financially in this country but it will turn around. Would you like to teach your child a lesson about tax planning and long-term investing and set them on the road to be a millionaire at the same time?
At age 16, your child opens a Roth IRA and deposits $2,000 earned at their job. If they never add another dime and the account grows at 11% a year (which is what it had been running for 70 years up until a while ago) . When they retired at 67, the account would hold nearly $410,000.
Now if they would deposit $2,000 for 3 years in a row at age 16 and then stops, the Roth will swell to $1,111,000.
Most 16-year-olds would not set up to do this so that’s when the adults have to step in and guide them. There are laws regarding Roth IRAs but this is seriously something worth checking out for your kid.
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It is so important for kids to start saving early. If parents save $200/mo starting at birth and earn 8.4% (this article suggests shooting for 11%), the child will have $100,000 in the account by age 18. That plus continued $200/mo contributions will pay for college.
$100,000 is not loads of money compared to the cost of college. $1,000,000 isn’t loads of money compared to the cost of retirement. People should aim for their kids to exceed these amounts by a wide margin.