Please note I am not a financial adviser. I am a Mummy Blogger. This is not to be read as advice. It is simply a plan we have, it may work, it may not. Do not plan your future on what you read on my blog. But plan to save when or where you can, cross your fingers, toes and eyes that no shit sandwiches come your way and hopefully things will be ok.
This idea is not my own, I purchased a book five years ago called "How to give your children a $1million each" by Ashley Ormond. The book has a lot more information in it and is worth a read.
But it really is pretty simple.
We have an account set up for each child. We use UBank, usaver online accounts - for no other reason than I liked their marketing material and the rates were good when we were setting them up. This is not an endorsement for them specifically.
The plan is that you put in one dollar per day into the kids accounts, we do $15 per fortnight.
Small children often get small amounts of money given to them, at birth, christenings, birthdays, Christmas and from loving family members. We put nearly all this into their savings accounts. Now that Popps is 5 and is starting to have more interest and understanding in money, she is given some to spend, some to save in her piggy bank and the rest goes to the account. The piggy bank ends up in her investment account in the end though - for now.
In years to come when the girls start their own part time jobs they will be required to add $15 per pay to this investment account too.
But what is it for, what do we get out of giving this to them?
Well, for us it isn't about giving them a car or a house deposit at some predetermined age.
These accounts will be able to show them how to invest money, how to save and how to manage what they earn. It will one day teach them directly about compound interest and the benefits of putting money away, and that every dollar saved now can help in the future.
The money wont be given as a gift at any stage in life, in fact there is no real plan of when we will pass it over, only that when it is the money will hopefully be spent on investments or to give them the freedom to pursue what they are passionate about, they may even be able to consider time off work - but they will be 50 by then!
If we didn't decide to do this five years ago Popps would have about $17.50 in her account, instead it now has just under $5000, of which we have only contributed around $385 a year... see $3000 in interest and adding in some 20 cent coins from Great Granny Iris. There is no way ever we would be able to give her this money otherwise. No Chance. None, Zip. Hell would freeze over with glitter glue and we would be wearing rags to visit it. But we can't access this ever. Not even to upgrade the 1993 Honda to have a working 'wireless'!
Here is a snippet from the book that I like:
If $1 is put aside every day over 50 years, the amount will be $18,250 ($365 x 50). But if that $1 per day goes into an investment fund and stays there it will turn into around $1 million. And that $1 million can produce an investment income of around $50,000 to $80,000 per year which is more than many people earn by working.
Now wouldn't that be nice.