Poor Child, Rich Child

There is a joy for parents when they get a new born baby. While it is joyful to see their baby, parents always forget financial planning for their child. Instead of preparing nest eggs for their child education fund, they buy lots of stuffs which is last short life. There can be fancy clothes, toys..etc which do not last long since the growing baby grows faster than their parents expect. Of course buying those necessities such as clothes and providing educational stuffs to their child is a responsibility of the parents, the parents should have a thought of always invest for their children future as well.

Parents who are wise enough to invest for their children future would ease a lot of hindrance that might be faced by their children in their adulthood. Their children would not worry for their education fund. If they do not intend to further their studies, they could use that fund to invest or staring a new business. They are not force to “make money from the market”, in which the people under this group often failed in their investment. They can be patience to wait until the market gives them a bargain hunting opportunity. That’s the essence of Value Investing.

The investment on behalf for their children should be starts as early as when the baby get born. This will save a lot of effort and money that need to pour in. The secret recipe behind this wonderful effect is COMPOUNDING EFFECT. Time is always equivalent to money. To fully appreciate the compounding effect, have a look at the table shown:

By starting as early as age of 19, B needs only pouring his money for consecutive 7 years and need not pouring more capital after age of 26. At the same time. A only starts his investment at age 26 and consistently pouring his money until age of 65. that’s 40 years effort compared to B who only 7 years effort. By assuming same amount they pouring in every year, that’s $ 2,000 and the return rate is 10% per annum, the end result would be shocking. The net earnings of B is more than A although A put more money and longer investment period. The only one thing that B sacrifices is he starts his investment 7 years earlier than A. That means, he might lose the opportunity to buy fancy watches, partying in high class club, buying expensive tech gadgets and so forth in his early adulthood. But, his sacrifice bears fruit after age of 26 and last for another 40 years. That means, he could just simply spending out extra $2,000 every year for another 40 years that A dare not do it if he wants to have similar amount that B gets at the age of 65.

By knowing this fact, what’s your choice for your beloved children? I believe as the parents who care for their children, the answer is already in your mind. The only consideration is to choose the CORRECT investment vehicle to do the job for your children.