While shopping for my kids this Christmas, I’m reminded by just how much you just want to spoil those little stinkers. What parent can deny this natural instinct? There really are fewer things better than waking up on Christmas morning to see how excited your children get when they open their presents.
Taking this instinct one step further, it’s also natural for you to want your kids to grow up to be the best adults they can be. You give them chores to do to learn hard work, you give them an allowance to teach them about budgeting, and you help them with their homework to encourage learning. And on the things they can’t do for themselves, you want them to still have every opportunity available to excel.
This gets me thinking about a much, much larger gift …
The Story of My Great Uncle’s Wedding Gift:
This past summer, one of my great uncles passed away from old age. He was one of my favorite great uncles, and a very positive influence in my Dad’s life.
One of the stories they told at his wake was about how he had given each of his young adult children land for their wedding. They lived in a farming community and fortunately for my great uncle, he had done quite well for himself (though you’d never guess from his very modest lifestyle).
That story and gesture has had me thinking on several occasions:
• How awesome would it be to give your young adult children a wedding gift like a piece of land, a house, or perhaps even just the money to get started with one?
For a moment, let’s forget about our personal finance aspirations like saving for retirement or paying down our debts, and let’s entertain how or if this could actually come true.
A Strategy for Building the Biggest Gift You’ve Ever Given:
Let’s suppose we try to accomplish this by using the stock market. When your child is born, let’s say you put money aside each month in a stock market mutual fund that returns an annualized return rate of 6% after taxes. Assuming you wanted to hit $100,000 by the time your child is age 25, how much would you need to save?
• $144.30 each month
Here is a chart of many different savings options and how much money you’d need to save each month.
Inflation is Always Working Against You:
As awesome as it would be to save up and give a gift like this, you’ve still got to remember that inflation is constantly working against you. So for example, even though $100,000 sounds like a ton of money today, what would it’s purchasing power be in 25 years after a 3% inflation rate?
• $100,000 today = $46,697.47 in 25 years.
Here’s what the rest of the savings goals would be like after inflation adjustment:
What About College for Your Young Adult Children?
Obviously we’re playing out this scenario just for fun. A more likely use of such savings for your children and probably more practical goal for most parents would be to save money to help pay for their kids college tuition.
You could use the tables above to accomplish the same thing. For example, let’s say you wanted to save $50,000 within 15 years, your new goal becomes:
• $171.93 each month.
Remember, Your Goals Come First:
Generous aspirations aside, no one can dispute that you’ve got to get your own financial goals in order before you can take on any extra-curricular goals like this. That means paying down your debts, saving for retirement, and reaching your other financial targets. Only after your main goals have been met can you do take on something incredible like this. Like all things with money, it comes down to what your financial priorities are.
Readers – Have you ever thought about doing something extraordinary like this, and running the numbers to see how it would be possible (even just for fun)?
Image Credit: Microsoft Clip Art