Baby millionnaire

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 the an aggressive portfolio returning 7.1%.  At this rate, we need to put aside for the baby only $120,000 for him to become a millionnaire at age 65! 

Great, can we do better? Say that you are a new father and want grandkids millionnaire. Instead of looking at only a 65 years horizon, couldn't we invest 30 years earlier when your kid are still baby's? Sure, this would cost you just a quarter of the above $30,000.

At this 90 years investment horizon, the rate of return impact is tremendous. Changing it to 8.0%, it would only take half, $15,000 to make a grandkids millionnaire.

If you are not a millionnaire yourself, this seems like a lot of money. For a multi-millionnaire, these are peanuts, less than 1% of your fortune to ensure prosperity for your family.