What a Dollar a Day Could Do for Your Child

What if a dollar a day could change your child's life?

A few weekends ago, when I went to a party and found myself sitting in a room full of young parents, I felt almost as if I had wandered into an alternate universe.

The conversation was full of words like "redirection" and "conscious discipline," both techniques I can only guess are brilliant. But it was only when someone mentioned a "behavior chart" that I found myself in familiar waters. Behavior like brushing teeth or tidying up belongings is rewarded using a sticker system, with a new toy when you get a set number of stickers. Now we're talking! I recognize bribery when I hear it.

And I couldn't resist the urge to calculate other, better ways those bribery dollars might be put to work.

Invest $1 a day

The sheer magic of compound interest means that as the years go by, investing just $1 a day -- or, for the sake of simplicity, $30 a month -- adds up to a sizable chunk of money. Several of the parents that day were holding infants, so I decided to make believe that they'd started investing a dollar for their kids every day from birth.

So here we have it: $1 is slipped into an envelope each day from the day a child is born. At the end of the month, $30 is put into an investment account (online brokerage accounts make it easy). The historical return on the S&P 500 since 1926 is about 10%, so I factored in a slightly more conservative annual return of 9%.

It's worth noting that these are long-term investments. The stock market can go both up and down, so if you're investing for anything less than 10 years, your money would be safer in a short-term vehicle. 

If the investment performs as hoped, here's how much that $1 a day would be worth by each birthday:

Data source: Author calculations.

I was impressed to learn that the money available around the time a child graduates from college (age 22-23) is just shy of the average student loan debt college graduates carried with them in 2017 ($28,650).

The party was precisely 488 miles from our home. That meant we had a 488-mile journey, during which I peppered my poor husband with questions about what he wished we'd saved more for and what he recalled costing more than we expected when our kids were young.

By the time the weekend was over, I'd made a list of things that can be done with a dollar-a-day investment. In fact, from music lessons and sports to tutors and space camps, the list of activities to save up for feels endless. But perhaps you can come up with your own list that takes into account the needs and interests of your children.

You can choose to spend the money as you need it for your child's activities or continue to let it ride (and rack up interest) until they're old enough to manage it themselves.  

Ages 10-13

By the time your child is 13, that dollar a day could be worth over $8,000. This is around the time in a child's life when he or she is into everything under the sun, including sports, music lessons, language tutors, summer camp, and other (freakishly) specific interests. I know a little girl who can't get enough Egyptian history, so making a trip to see relics is money well spent. 

Ages 14-18

By the time your child is 18, that dollar a day could be worth almost $15,000, which is great because teenagers are expensive. If you're not paying for a travel sports team, you're funding a class trip. There's driver's education to pay for, an increase in your auto insurance rate, and, for some kids, a sudden interest in expensive tennis shoes. Even if you wisely steer them toward less expensive kicks, you'll still have senior pictures, prom, and college applications to add to your spreadsheet.   

Ages 19-23

By the time your child is 23, that dollar a day could be worth over $25,000. If you don't plan to foot the entirety of your child's college education, you're in good company. Currently, just 29% of parents plan to pay all costs associated with their child's education. The other 71% will do what they can. That $1 a day investment is now enough to help you get your child started in school, purchase a used car if they need it, or pay some of their living expenses. 

Age 24+

My husband and I (I'm speaking for him, although I suspect he stopped listening somewhere around the 200-mile mark) wanted our little ones to have investments in place and give them a foundation upon which to build their futures. That's why we kept making small investments throughout their school years. It means that we can give them a bit more financial stability as these young adults enter the real world. 

But you know, there's no rule that says you should only have one dollar-a-day system going at any one time. What if you invested $1 a day for those expensive teen years and another for early adulthood? The plan is completely customizable -- and so simple it almost seems silly. 

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