Monday, October 26, 2020

How to Set Your Child on the Road to Becoming a Millionaire

/Piggy bankp>

 It may seem to be a near impossibility,  setting up your child so they can become a millionaire. Many of you will scoff and snort.

Even a child who grows up to work tables in a restaurant or diner can learn the skills that will make themselves into a millionaire one day.

To begin with your child will have a great advantage on their side. They have time.

Time allows for compounding. An initial investment with a return of just 5% will double every 14.4 years.  To estimate the doubling time for any amount take the number 72 and divide it by the percentage interest rate.. This is the rule of 72. It is not perfect but gives a good ballpark estimation.

Cash, bank notes, savings

So $100 at 5% takes 14.4 years to double to $200, then doubles again in another 14.4 years, which doubles again  in the same period.  So after about 43 years our $100 invested at 5% would equal  $400.

Of course you don't just invest the $100 and leave it. You add to it over and over again. At a rate of just $10 per week you would be adding an extra $520 per year. Each of those $10 would double in 14.4 years too.

As you add more dollars they in turn generate pennies of interest which in their turn add up to dollars generating more pennies and dollars.

Teaching your child early about compound interest is possibly the greatest way to give them the tools to become a millionaire.

Teach your child about money as a tool.

Give them pocket money, pay them for doing chores around the home. Even consider adding extra to the pocket money that they save in lieu of interest.  Allow them to spend their pocket money if they wish, but teach them that when the money is spent it is gone. Don't buy something that they wanted and were saving for if they spend all of their pocket money on something else.

Encourage responsible spending. Allow them to learn to divide pocket money into spending on what they want, what they need and savings.

ATM Money boxSupport them in opening bank or credit union savings accounts. Accounts that pay a reasonable amount of interest on small balances. Let them see their money grow as the interest mounts.

Teach your child to invest. Help them buy a stock in a company they like. Even a small fractional position in a stock like McDonalds will pay a dividend and grow over time. Or maybe buy a share of stock for them at a birthday or holidays like Christmas.

You will give them the knowledge and experience they need to save and invest as they enter the workplace they will be kitted out for a life in the real world. They will know that money is an asset to be used wisely. Spent on what you need, saved for things that you want and invested to increase your monetary wealth.

Thank you.

If you have found this post interesting maybe consider following our link to Amazon to see some nice children's money boxes and "piggy banks" That you can use to start your child on their road to millionaire status.

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