How Fast Can A Child Save A Million Dollars? | Impression Real Estate
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How Fast Can A Child Save A Million Dollars?

Posted by Impression on 03, Dec 2018

Are your children in Kiwisaver? If they’re not, it’s a great way to get them started with their savings – and it can quickly start to add up.
 

Whether it’s small regular contributions or lump sums, by helping your kids put money into Kiwisaver, you’re helping them harness the power of compound interest. Albert Einstein called it the eighth wonder of the world: ‘He who understands it, earns it; he who doesn’t, pays it.’

 

“You don’t need to have a big income, or save a lot, or get the number one return every year to see the power of compounding interest,” says Michael Cave, AFA, director of Cave Financial. “There is no point being conservative or totally risk averse on a 30-plus year investment plan – you need to bet on the continued prosperity of modern economies – so go aggressively into growth funds.”

 

Let’s say your child has a $1,000 starter from a parent or grandparent. You put in $20 a week until your child is 18. From that point, he or she is earning $36,000 each year, increasing by 2% each year. Assuming growth of 8%, plus 3% contributions during your child’s working life (and an extra 3% from their employer), they could have million dollars in the bank at the age of 48:

 

Scenario 1.

$20/wk

$1040pa

Age

Balance

Compounding Interest

19

 $           63,615

 $                    4,712

23

 $        108,802

 $                    8,059

25

 $        137,110

 $                 10,156

48

 $    1,076,158

 $                 79,715

65

 $    4,197,000

 $              310,907

 

That’s an impressive demonstration of the power of compound interest – even if your child takes out a big lump sum to buy a first house, they will have plenty of time to continue building their wealth.

© 2018 Impression Real Estate Limited - Licensed Real Estate Agent (REAA 2008)