Fribble
How to Make Your Kid a Millionaire
By "LLUD" (Garnerjasl@aol.com)
June 20, 2001
Here is a surefire way to make your kids into millionaires by their 60th birthday. Well, it's about as surefire as you can get in the market.
I speak of DRIPs of course. I don't own a drip but I recently enrolled my seven-year-old daughter in the General Electric Drip plan, fully anticipating her future wealth even though I will be long gone by then. Here is how I think it will work:
I hope to have dripped in enough money by her 18th birthday that she will at that time own 100 shares of GE. That works out to dripping in about 10 shares a year or roughly $500 per year for a cost basis of about $5,000. Most people could manage that amount. From there compounding works its magic...
Assume a 15% compound growth rate which is GE's typical earnings growth rate. This doubles your money every five years. 100 shares worth about $5,000 to start, age of daughter, 18. Here's how the numbers look over time:
| Years |
Age |
Approx. Worth |
| 5 |
23 |
$10,000 |
| 10 |
28 |
$20,000 |
| 15 |
33 |
$40,000 |
| 20 |
38 |
$80,000 |
| 25 |
43 |
$160,000 |
| 30 |
48 |
$320,000 |
| 35 |
53 |
$640,000 |
| 40 |
58 |
$1,280,000 | |
THE MIRACLE OF COMPOUNDING! The pity of this is, if the schools (and "guv'ment") took 30 minutes to teach this then kids and parents would not have to have any focus on the market. The kids would simply get rich by virtue of being young; time does all the work. It's interesting that the real increase in absolute dollars almost all occurs during the second 20 years.
What an argument for long-term buy-and-hold investing!
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