Funding Your Child’s Future
Funding Your Child’s Future
Pretend that you have a 12-year-old child. Let’s say you make a one-time investment into a S&P 500 mutual fund of $1,000 at the child’s current age. An S&P 500 index fund is a group of stocks considered to be generally representative of the stock market. This index is composed of 400 industrial, 20 transportation, 40 utility and 40 financial companies.
Assuming that you never placed another dime into his/her account, by the age of 65, at an annual growth rate of 12%, he/she would have an investment portfolio worth $406,027.
Let’s look at another scenario. What if you started with that initial investment of $1,000 in a mutual fund that averages a 12% return, compounded monthly. Now say that you set aside $150 each month to add to the fund. Your child, should he/she continue adding to it in the same amount, at the young age of 65, assuming the child has no other investments whatsoever, his/her net worth would be $8,949,244.81. At age 75, he/she would have $29,570,476.09.
Your thoughts on this subject? Your comments appreciated!
Content © Rich Brott, 2007
