Have a Child? Start Their Retirement Fund

When you were 5 years old were you thinking about retirement? How about 10 years old? 15? 20?  Of course not!  But you should have been.  Why does it matter to start saving so early for something that is so far away?  Because time is money. Literally.  Consider the following, if you put $1000.00 into an account when you child was ten years old and recieved 5% interest (easily attainable in a long term CD which is very safe) and put in $100.00 annualy the account would have reached a value of $43,270.42 by retirement (age 65).  This is a tremendous return on investment and a large amount of money.  Also remember this is including on $100.00 per year as an addition.  The average 401K puts around $1200.00 annualy into your account.  If you were able to contribute $100.00 annualy until your son or daughter was 21 and they then contributed the $1200.00 the account would be $217,840.61.  This amount would certainly be a great amount to base a retirement on.  This is only in a low return / low risk CD or savings account.  If you were able to save more or split the $1200.00 into an investment portfolio of mutual funds and stocks the potential return is much higher than the 5% used to calculate the numbers above.  On a long term basis tried and true stocks have returned a very healthy percentage on innitial investment.  Dividend based funds are another way to make your investment more safe.  The bottom line is that saving does not have to be complicated or expensive.  Start as early as possible and let the interest pile up.  This is why as parents or grandparents contributing (to the same account or savings bond) it is so beneficial to the child.  They won’t be thinking about retiring or saving money when they are five years old….but you can for them.  So by the time they graduate college and start to really focus on their futures, you can have given them a 15 year head start.