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Parents: How are you financially prepping your kids?

Discussion in 'The Lounge' started by newyorkin, Apr 12, 2007.

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What are you doing for your kids adulthood financing?

  1. Jack, at 18 they're on their own...

    4 vote(s)
    30.8%
  2. Funds tucked away for growth/under mattress

    3 vote(s)
    23.1%
  3. Want to put a nest egg together, but don't have the funds

    2 vote(s)
    15.4%
  4. I roll around nekkid in money

    4 vote(s)
    30.8%
  1. newyorkin

    newyorkin 1 ton status

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    Just wondering. I borrowed $1500 from my kids to buy my bike last November, and I just paid it back. Now I'm wondering where to put it (CD/Mutual fund/IRA/Coverdell, etc).
    My goal is to give them a nice gift when they graduate high school or at whatever monumentous event in crossing to adulthood. This is primarily budding from their money, or maybe something like $20 a week put aside for them from me.
    It would not be to buy them a car or anything like that, but probably college money or maybe a downpayment for a house, business capital, or something along those lines. Future-building stuff, not "life support" stuff.
    I don't intend them to know anything about it. We're teaching them now that they need to manage their money carefully and prep for the future. I don't want them living with me when they're 35... My parents and grandparents helped me and my siblings out a lot starting out, so I'd like to give my kids the same opportunities.
    :haha: :haha: Of course by the time the money grows in any significance, America will either be in flames and overrun by illegal immigrants or under Sharia Law and the funds will be worthless... :rotfl:
     
  2. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    I think if I was you I'd set up 2 accounts for each of them. One retirement account, one house down payment fund. I have no idea why more people don't do it, but if every parent put $1000 into a retirement fund for their kid upon birth and each year until the kid is 10 years old.... people would be a lot better off come retirement time. A single $1000 installment at age "0" would be over $100,000 at retirement age (60), with an 8% return. If you put in a thou each year for the first ten? you're kid would be a millionaire. If I was doing this, I'd set the whole thing up so the kid couldn't get access to either account until later in life. 18, 19, 20 year old kids don't know jack. Make it 25 years old at least before they get control of anything, if you can.

    I'm never gonna have kids... so I voted for the nekkid option..

    j
     
  3. newyorkin

    newyorkin 1 ton status

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    Believe me, I've run the numbers on a retirement account for them a million times, but I have to put mine first. $1k at birth and $1k per year until age 65 will yield $250k in interest at 4% average for a $1/4 million total when they go to tap it. That's pretty sweet icing on top of their 401k or whatever retirement plan they get going when they start working. I'd love to be able to do that for them, but I have to get my retirement stabilized first. I can do $1000 a year for all three of them, so it'll be $333 a year for them :haha:.
    I was stoopid about it and didn't start until I was already 29, so I dump as much as I can into my retirement funds when I can.

    That's another thought I had, though. I may turn this into a retirement fund for them. If they drop out of high school, etc, the money will just have to sit. At that point I'll put it in a 401k or something they can't withdraw from without being penalized.
     
  4. newyorkin

    newyorkin 1 ton status

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    Dayum... I just reran it with your 8%... $1k at birth and $1k every year after for 65 years at 8% ends up at over $2 million... :woot:
     
  5. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    yeah, IMO 8% is an entirely safe number to work with. Other than really crappy down years (2001, 2002), you'll almost always get more than 8%, if you know anything about picking funds. My two biggest holdings are DODGX and WFC. DODGX has a 14.81% annualized return over the last 20 years... WFC has a 21% annualized return over the same 20 years. Its always good to error on the side of caution and assume there will be recessions, bad years etc... so I tend to use 8% whenever I calculate retirement stuff... even though I very well may score a lot more $ than that. :)

    Run the single $1000 installment at age zero scenario again, but this time with 14% interest. Whoa nelly. :) Love my DODGX...

    j
     
  6. Fubeca

    Fubeca 1/2 ton status

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    Don't forget inflation :)

    That 2 million is really only worth about $270,000 in today's dollars. It is still a lot of money - but not nearly the buying power of $2,000,000 today. (Edited for clarity)

    (Assuming average 3% annual inflation over the entire 65 year period)
     
  7. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    uhh... no matter what inflation in the future is, if you have a million dollars, you are a millionaire...

    j
     
  8. Fubeca

    Fubeca 1/2 ton status

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    Thanks for the clarification - I'll be more clear in the future. You know what I meant.
     
  9. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    yup. :grin: Inflation certainly sucks.... and no investment will beat it in the long term like stocks will. Most everything else can hardly even keep up with it.

    j
     
  10. CK5

    CK5 In my underwear Administrator Premium Member GMOTM Winner Author

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    I don't normally give a lot of advice but I will here; One of the best things you can do for yourself and your kids is read the book "Rich Dad, Poor Dad".

    Probably the best financial book written on understanding why some people fail and others do not, a must read!
     
  11. AZPiNsTrIpEd

    AZPiNsTrIpEd 1/2 ton status

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    I agree definitely check this book out, I learned alot from it!
     
  12. newyorkin

    newyorkin 1 ton status

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    I have mixed feelings on Kyosaki's books. I have a few and have read one or two, but I can't seem to figure out exactly what his constructive advice is. It was great for pushing me closer to financial awareness, but I can't seem to figure out what I walked away from it with.

    I know you are rare to offer advice, so I appreciate it. :bow: :thumb:
     
  13. TSGB

    TSGB 1 ton status

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    It's true. :doah:
     
  14. 76zimmer

    76zimmer Flyin Rat Premium Member GMOTM Winner

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    I would try to do some research on Mutual funds...if your going long haul, they should average 12-15% for decent ones. I wouldn't go with anything less than a 5 year old one. Maybe 10 to have confidence that the fund managers know what they are doing.
    And The Asian market is still growing by leaps and bounds, bastards are taking away our production, and we keep buying the sh!t. Shooting ourselves in the foot.
     
  15. Stickseler

    Stickseler 3/4 ton status

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    Mine have and ING account tied to mine, they get 50 every 2 weeks put in there, I set it up for when Car age comes so I just buy a CD each year with the balance, it return like 1/2 point more than ING. First year I bought a 5 yr, this yr a 4 and so on so they all come due at the age of 16 for the oldest.

    I figure if they want money to retire they can get it like I will, work forever. But if the oldest gets that big MLB signing bonus...he said I could have the interest off it till I die so I'm set :)
     
  16. Fubeca

    Fubeca 1/2 ton status

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    Another option is TreasuryDirect.gov - right now the rates on T-bills are very competetive - and the earnings are not subject to state taxes (probably not a problem if its in their name - but nice if its in your name or they make lots of interest)
     
  17. CK5

    CK5 In my underwear Administrator Premium Member GMOTM Winner Author

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    Acquire assets, not liabilities.
     
  18. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    that is sort of profound... in the common-sense-simplistic "buy low, and sell high" kind of way. lol.

    j
     
  19. CK5

    CK5 In my underwear Administrator Premium Member GMOTM Winner Author

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    Yes, but most of us simply create more debt (liability) the more we make, even though it is an easy concept.
     
  20. CDA 455

    CDA 455 3/4 ton status

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    Isn't that the irony :doah: :haha: ?!!

    IMHO, Economics 101-102 should be a requirement for highschool and college graduation.
     

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