In many recent meetings, the question has been posed to me, by mostly new parents, what to do with the child’s money?? They got $50 for a baptism or $100 for a birthday or or or or….these incremental amounts of money come in and so on and so forth. What I mostly see, and fell victim to myself, is the money getting put in a savings account earning .01%. Oh and you want to keep it separate, it’s theirs after all. Now don’t get me wrong, there are many different options for the money, but let’s just keep this super simple with one example.
I was born in February of 1982 and for math’s sake let’s just say over the course of my first year on this planet I was given $1,000 (which might be a stretch, but let’s run with this). If my parents had said “let’s just purchase America and all it’s potential” and had put that $1,000 into the S & P 500, with dividends reinvested, that $1,000 would have been worth $17,600 when I turned 18, and then would have gone on to grow to roughly $45,000 today. Simple doesn’t mean easy. In that time period there were harrowing market draw downs and in the 2007-2009 time frame more than 50% of my account value would have evaporated on paper!
By no means do I want the future of all young ones to be tied up in a single S & P 500 index fund. What I do want is for that money to not sit idle, with no purpose or chance of material growth. It takes all of 10 minutes to set up an investment account and all of 3 seconds to buy an investment in that account. If you want to help figuring out how you can keep it simple and help yourself or your family members, shoot us an email or give us a call.