Baby millionaire
We often hear the term trust fund babies. How can you create them? How is this relating to the time value of money? I want to explore how much do you need to invest in a baby to make him a millionaire in today's dollar. Let's use a portfolio returning 7.1%. At this rate, we need to put aside for the baby $11,600 for him to become a millionaire at age 65! That is without inflation. Net of inflation, or said otherwise 1 million in today money, $41,900 would be required. Required balance to get 1 million at ag 65 with a return of 7.1% and 2% inflation Note that these are all proportional numbers, meaning that half of $11,600 would provide for half a million at age 65 starting from 0, before inflation. In Canada, we recommend investing in a RESP for the children (max $2,500 per year). We qualify for 20% from federal from the SCEE. If you are in Québec, you also qualify for 10%. Here’s a small table if you contributed to the maximum from birth up to a certain age. Ne...