A while ago, Gill Fielding, one of the secret millionaires and my mentor, was sitting in the dentist with her 13 year old daughter. There were few good magazines so they got talking and her daughter asked Gill how much she would have to save per month, in order to become a millionaire.

Gill said 'work it out' so her daughter spent 10 minutes or so doing some sums. She worked out that if she saved £1,984 per month from age 18 to age 60, then she would have a million. Then Gill showed her that, through the power of compounding, if she just invested her money and achieved an average return on her investment of 12% per year, she would only have to save/invest £81.22 per month to achieve the same end.

Everyone who has children in the UK gets a child allowance. It's about £17 per week or £73.66 per month for the first child. If you took just £50 per month of that money and invested it, from the day your child was born until they were 18 years old (then you stop - they can earn their own money, right?) and achieve a return of 12% per year, how much would you have accumulated for your child at age 18?

£35,584. Enough for a deposit on a house, to send them to college, or set them up in a business.

Okay, so your kid is busy travelling the world, working as a ski instructor, hanging out of trees protesting about something or other. You despair of them ever getting a proper job and you are worried about their middle age, let alone your retirement! You decide to leave the money in the investment vehicle to provide for them later. How much would they have at age 50?

£1.3 million. Outrageous! You can make your children into millionaires in their lifetime just by investing their child allowance! By now, your lanky waste of space who was so unpromising as a teenager, has found their passion and are happily earning a living. You decide to leave the money for another 10 years, till they are 60. By then they would be worth #4.1 million.

Quite rich enough to look after you in your old age. I would write it into the conditions if I were you!

 

© Nicola Caincross of The Money Gym 2008. No content to be reproduced without written approval of the author.

Nicola is a Wealth Coach, Author, Publisher and Speaker, and the Director of The Money Gym.

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