My Family’s Money

We all want a better life for our children.  The evidence for this is everywhere and often makes its way into advertising campaigns of all varieties.  Where I live in California we have commercials about saving our children from energy crises.  There is GPS for kids that will help us locate our children in the off chance that they get snagged by someone other than their estranged relative.  Toys keep getting bigger and better as we get our children cell phones, laptops, gaming consoles, and extra curricular activities that would have made us the happiest kids in the world 10-15 years ago.

A fellow personal finance blogger brought up an interesting concept that those who want to give their children a better life might want to give some thoughtful consideration – helping your child get rich.

In this post, the Silicon Valley Blogger praises the power of compound interest (others might call it the magic of compound interest, but I digress).  She writes:

While it may be late for some of us to maximize our lifetime investment potential, it may not be the case for our children. If you start an investment program early enough, especially for your kids, you could help them acquire a million dollars by the time they’re 40. Investing even with the simplest of portfolios can help get you to that point.

The basic idea behind it all is that a small amount of money invested at an early enough time will produce very large returns over a large enough time horizon. If I invested $30,000 for my soon to be born son and averaged a 5% return after taxes this money would become $211,199 by the time Junior is 40. If he were to contribute an additional $10,000 a year once he turns 22 that sum would jump to $531,859.¹ That is a lot of money.

But pondering this scheme has got me questioning whether it would even be a good idea to even give my child this type of wealth. Will it really make his life better? Will it teach him to work hard and to serve the greater good? Will it engender a love for others that is authentic and moves him toward action? Or will it make him a consumer, buying things he doesn’t need – making his life meaningless, shallow, and empty? Am I setting him up to excel in life or to waste it away?

Better Than A Millionaire – Giving Your Child the Gift of Giving

In thinking about how to definitely avoid turning my precious child into a mindless, heartless, and soulless consumer I think I came up with one of the best ideas I have ever had – teach my child to give their unearned, acquired wealth away.  After all, it is better to give than to receive – right?

The idea behind this is simple: instead of passing that wealth along to your child as their personal assets, teach and train them to manage it like they would a trust fund for a non-profit organization.  When they come of age instead of worrying how they are going to spend the 200k you saved for them you will be filled with the joy of seeing your child full of joy with meeting the basic life and infrastructure needs of thousands of people the world over.  They could do this in one lump sum, making an organization that supplies food to those affected by regional instability (read war, famine, or disease) a very happy organization.  Or they could continue to grow and manage the fund, giving a portion of the profits away while reinvesting another portion and even adding additional money to grow the fund’s giving potential. Talk about giving to the max!

They could then go from there and give the fund over to their children who could add to it and grow it and give even more away, who could give it to their children, who could give it to their children, who could give it to their children, and on and on it goes.  The amount of wealth that could be turned into improved lives for individuals and communities in need the world over is impressive – and it can all begin with you.

The Price of Privilege – Making the Most of America’s Acquired Wealth

I am a firm believer that for those who have much, much is required.  American’s, with their amassed wealth and technology, are among the richest in the world.  Because of this I feel that we can make a significant impact on the world around us simply through the dissemination of our wealth and technology to those that really need it, the poorest of the poor.  This needs to go on at a government level, but I think that the vast majority of it should be done by individuals for the sake of other individuals.  Actual people starve to death every single day at the rate of about 17 per minute.²

None of us would let a starving neighbor die if we knew that something we could do could help.  Living in the age of globalization is bringing into sharp relief that fact that all mankind is now my neighbor.  My energy use not only will help avoid rolling brown-outs in my southern Californian home, but it also can affect the Arctic Inuit’s way of life.³  I am responsible for my actions and their impact on humanity at large.

This is a message my children need to hear loud and clear from me, and what better way to teach it than to create some wealth for us to manage and improve our world together.  I will avoid fostering mindless, heartless, and soulless children by doing the exact opposite – giving them the resources to make their creative problem solving a reality, the compassion to see all men as their equal, brother, and friend, and I will teach them that the quality of a life is measure in more than houses and cars and iPods and comforts – it is measure in life freely given.

1. A single male making $30,000+ a year should be more than capable of socking away at least $10,000 a year. If he is married and both he and his spouse work then they should be able to double, if not triple that amount easily. [↩]
2. Numbers are from a 2003 United Nations report as reported in the BBC article UN warns of future water crisis [↩]
3. They did sue the U.S. government for it. [↩]