Wisdom

Posted on 30th May 2017 by Trevor Reynolds in Blog |Finance in Focus

Starting early is so important especially in Financial planning.  So I wanted to share a story of one family who have done just that.

Their first child was born and the parents took out a modest savings account putting away $250 a month — today (18 years later) the account is worth over just over $100,000 achieving a only 6.2% return.   Their daughter now has a great start and will have little or no university debt (depending where she goes)

At the same time they also did this for themselves as one of the many things they added over time, houses, shares and their business, always remembering to pay themselves first as their income grew.

So now that their daughter is 18 they sat down and explained the magic of compound interest and together decided to take out another savings plan jointly with their daughter. She would contribute 25% and the parents would contribute 75% to ensure that she would be financially fit and would soon see the benefit and magic of compound interest.  Together they will contribute a $1,000 a month.  What could this become in 25 years when the daughter would be only 43 years old?

At a modest 6.2% it will be about $720,000.  If it achieved 10% it would become just about $1,300,000.

Remember this is just a $1,000 a month for 25 years, a total contribution of $300,000.  Started when their daughter was 18 and now that she is turning 44 she has options — you as a parent have the benefit of wisdom and this is a wonderful gift to pass on to your children. (This also fits under the gift tax allowance here in Japan.)

Talk to Banner and we can help make this happen.

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