As a father of six kids, yes six, it is my responsibility to teach my kids how to manage and multiply their money. Most parents, like mine, taught me how to work, make money and spend it. They did not teach me how to manage or multiply my money. I had to learn how to do that on my own, and thankfully, I did learn.
Now, it is my responsibility to pass on what I’ve learned to my children. Hopefully, since they are learning about money as children and not as a twenty five year old as I did, they will be much more successful with their money. If I do a good job teaching them, they may be able to become millionaires as well, and we can keep building family wealth and our ability to help other people in need.
Lately though, I’ve been thinking a little differently. Sure I can teach my kids how to manage and multiply money. They may even become millionaires, but what if there was a way I could virtually guarantee they would become millionaires. And, I could do it for just $10,000 per kid.
Well, it turns out, that idea isn’t so far fetched. I first got the idea last year while out on a walk in downtown Salt Lake City. I’m sure it was a chilly evening since March is usually cold in Salt Lake. After a bit of work and pondering, the idea started to have legs, and it is continuing to evolve.
Now you may be thinking, $10,000 can’t make someone a millionaire. And, you would be dead wrong. In fact, $10,000 can make someone a multimillionaire, if you start soon enough. The problem is, we all wait too long to get started on our investing. Many Americans wait well into their 30s or 40s to begin investing and saving for retirement. While it’s better late than never, the real opportunity to build wealth needs to start much sooner especially if you are going to turn $10,000 into a $1,000,000.
I know it sounds little like magic or hocus pocus, but it really just boils down to time…and economic and political stability. Let’s indulge ourselves a bit by assuming economic and political stability will exist in the future. Then we just need to concern ourselves with what happens when we invest $10,000.
According to Investopedia, the average growth rate for the S&P 500 dating back to 1928 is 10%. At 10% growth, it takes money about 7.2 years to double your money, which allows us to multiply our money like this over a 70 year period.
Initial Investment: $10,000
7 years: $19,487
14 years: $37,975
21 years: $74,002
28 years: $144,210
35 years: $281,024
42 years: $547,637
49 years: $1,067,190
56 years: $2,079,651
63 years: $4,052,651
70 years: $7,897,470
Now, why did I use a 70 year period for this example? The answer is simple. Because if you put $10,000 into an investment fund the year a child is born, allows it to grow in this manner. The number years mirror the child’s age. Are you getting the picture yet? $10,000 in an S&P Index Fund could become $1,067,190 by age 49 based on historical returns.
Now I know that sounds like a long time however, based on statistics, the average population life expectancy worldwide is approximately 70 years. In theory even with economic downturns, $10,000 will turn into $1,000,000 within a person’s lifetime between 49 and 70 years. If everything goes well, $10,000 could even make a person into a multimillionaire. So let’s look at the chart a bit differently based on age.
Initial Investment at birth: $10,000
Age 7 years: $19,487
Age 14 years: $37,975
Age 21 years: $74,002
Age 28 years: $144,210
Age 35 years: $281,024
Age 42 years: $547,637
Age 49 years: $1,067,190
Age 56 years: $2,079,651
Age 63 years: $4,052,651
Age 70 years: $7,897,470
Time for some questions.
“If you could make your kids into multimillionaires, why wouldn’t you?”
“How would it change a your child’s thinking if they KNEW they were going to be a millionaire?”
“If money were not an issue, what would your children and grandchildren do to help others? How much good could they do?”
“If there were more millionaires, with good hearts and values, how would our world change?”
I came from financially challenged family. The idea of being a millionaire was not in my head nor in my vocabulary. The possibility of being a millionaire was a foreign concept to me. At age 25, that all changed, and along with it how I thought about money and myself. The perception of who I would become grew together with the possibilities of what I could accomplish in life.
Now, I have six children. My oldest is headed of to college in the fall. My youngest is six. I look forward to how they will use the principles and the money they will be empowered with to help others in need and to change our world for the better.
With a bit of work and vision, it’s possible to change the financial outlook of our families, our children, our country and the world. Now what will you do? A great option to start is with a Vanguard S&P Index Fund.