The post is going to be following my journey in setting my daughter up so she’ll be a future millionaire. There’s no tricks or gimmicks – just saving, investing and time.
The goal is to save towards my daughter’s 21st birthday and handing over a $210,000 cheque. Representing $10,000 for each year of her life.
Am I worried about handing that sum of money to a girl that’s just turned 21? Not at all. By that stage, she would have a lifetime worth of experience. By watching her parents be financially responsible and learning the value of investing, it is only a matter of time.
Becoming a future millionaire
Almost straight away, you’ll notice something is missing. The title of this post is called Future Millionaire but the goal is only $210,000. This is because I want her to begin her own journey to becoming a millionaire, in her own time. I’m a just providing her with the financial mindset and showing her how important time is in investing.
The complicated part of this journey is that my wife and I are saving towards the end of our working journey. We want to be financially stable with what life throws at us. My dream reaction from my daughter would be that she invests the majority of it in a low-cost index fund. She uses some of it towards education/furthering herself. Invests in things that align with her values, and finally spend some of it because after all, she’s 21 and should enjoy herself.
There are just under 18 years until she turns 21. The forecasted saving rate would have to be $10,000 a year, without taking into account investing/interest rates. I’m not currently in the situation to be pocketing $10,000 a year just for my daughter – but hopefully, in a few years, I might be!
I’ll be using the $10k/year as a benchmark in my goal. The plan is to invest what I can and use the time-old success formula of consistent investing + time and letting compound interest do its thing. As an example, if I managed to save $10k/yr for this journey and I invested it the whole at a modest 5% return – by the time she turns 21, that would equate to over $375,000! For what it’s worth – you would need to save approximately $5,750 per year, invested at 5% for 21 years for it to accumulate to around $210,000.
How am I going to achieve this?
I going to look at different investing methods to achieve my goal. Some will be more aggressive than others, some traditional, some unorthodox. Some of the channels I’ll leverage are
- Traditional bank savings account
- Peer2Peer lending
- Low-cost index fund
- Growth stocks
- Dividend Reinvestment Plans
- Aggressive growth stock
- Property
- Social trading
Fortunately, we did have the foresight to begin investing for her once she was born but that was just bit and pieces – but creating a more formal plan, we will hopefully begin to increase what we can invest and let compound interest have fun with the years to come and let it grow from a tiny amount to a significant amount!
Over the coming months/years, I’ll post how I’m tracking against my targets, any new investments or general news of the journey. I think I just scared myself when I saw that my daughter will turn 21 in 2038…. Seems so long away!
I’ll be using my trading knowledge, sticking to basic financial rules, and trading results to help her on her journey.
Have you done or undertaking a similar journey – let me know below!