My son just started his junior year of high school, and although I have plenty of time to make a decision, I’m already contemplating what I want to give him for a graduation present in a few years. Television shows and movies tend to exaggerate what teens get from their parents for high school graduation. A brand new car might seem like a common gift, but the digital radio alarm clock I received from my parents is likely closer to the norm. Still, what if parents could give their child a Hollywood worthy graduation present? Would you believe me if I said you could give your son or daughter $60,000 for a graduation present? Here’s how I think you can do just that.
But first, let’s talk about me for a second. I am currently contemplating whether I should give my son $1,000 for his graduation present. The gift will come with a couple of restrictions.
- He doesn’t get it in cash, it must be invested.
- He cannot touch it until he reaches the age of 65 years old.
Thinking about the restrictions got me thinking – how much would $1,000 turn into through decades of compounding? Bloomberg suggests that long-term investors should expect to earn 6-7% per year on investments once you factor in inflation. For example’s sake, let’s use 6.5%. After 47 years, that $1,000 would be worth $19,294.41.
Not bad, but I wondered to myself how much better the sum could be had I invested $1,000 for my son on the day he was born and then gave the investment to him as a graduation present. After redoing the calculations using the same 6.5% average yearly growth, $1,000 invested on the day…
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