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HOW TO GIVE YOUR KIDS $1MILLION EACH (and it won’t cost you a cent)
As a father of two young kids, I wrote this book to outline my very simple and practical plan for parents to not only build wealth for their kids, but also to help teach them about money - how it works, how to manage it, and how to make it grow.
In a nutshell the plan is to put in $1 per day, starting from when they are born, plus 1 hour per month = financial security for life.
If parents:
- start on the plan and open a broker account when the child is born,
- put a dollar a day into an investment account (actually $31 per month via a bank direct credit is more practical),
- invest in growth assets (ETFs),
- reinvest all the earnings along the way,
- then the fund can grow to $1 million by the time the child is 50 years old
- or a couple of decades earlier if you increase the contributions for inflation each year,
- as soon as the kids are old enough, they take over the plan for themselves using their pocket money so they get the hang of how money grows over time.
It’s about teaching kids good money habits, not just giving them money.
The book appeals to every parent’s desire to provide wealth and security for their children, taking a simple, fun, low-risk approach.
As for how the money is invested, I outlined my very simple ETF-based portfolio (back when there were very few ETFs on the market), before the days when ETFs ruled the world. I was well ahead of my time!
And yes, I set up funds for my kids as per the plan in the book. Twenty years later, they are now in their twenties and well on their way to financial freedom! My daughter (born 1994) has already bought her first property in Sydney – with NO help from the bank of ‘Mum & Dad’, and my son (born 2000) is earning (and saving) money, in a job that he loves. But most importantly, they both love their careers, their partners, and their lives.
The book appeared in ‘best seller’ lists in Australia, was featured on TV and radio, and translated for foreign sales (South Korea).
Details
Published: July 2006
Publisher Wiley–Blackwell
Paperback 240 pages
ISBN-10 0731405382
ISBN-13 978-0731405381
Dimensions 20.83 x 1.78 x 20.83 cm
Contents
Preface
Part I – On your marks
- Giving your kids $1 million each
Part II – Get ready
2. Finding $1 per day
Part III – Get set!
3. Getting started
4. Investment basics
Part IV – Go!
5. Company shares
6. Property investments
7. How the fund grows over time
8. Handing the plan over to the kids
9. Where to find out more
Glossary of terms
Preface
This book is unlike most personal finance books you may have read or seen. It doesn’t contain promises to reveal the "seven secrets of success", the "nine magic keys to wealth", the "10 things wealthy people know that you don’t", or anything so dramatic. There are no such things in real life. Nor does this book require you to attend any seminars or courses, or buy trading systems. The plan I have developed is not a get-rich-quick scheme. It takes many years of patient investing to build real wealth.
Every day we are bombarded with advertisements for different types of investments—on television and radio, in newspapers and magazines, on the sides of buses, via spam emails and even internet pop-ups—all promising wealth and happiness. Almost every day, new products are launched in an already overcrowded market, and it seems that they are getting more and more complex, using all sorts of fancy structures, financial wizardry, and layers of fees. Many of these products are so complex that even professional investors need teams of accountants, lawyers, and tax experts to understand them.
But there are a number of relatively simple, low-cost, tax-effective, low-maintenance products that are available to virtually everybody who wants to build long-term wealth. Even small investors can start out with as little as $1. Many of these products have been around for 50 years or more and continue to work for investors year after year, decade after decade. But finding them among the thousands of other products is a bit like trying to find a needle in a haystack.
This book doesn’t contain any brilliant new ideas that you can’t find anywhere else. The plan I outline is the result of lessons I have learned from over 20 years of investing and being in the finance game. What I have tried to do is set out some practical steps and processes that practically anybody can put into place to build long-term wealth, as long as they stick with it and see it through to completion. It is designed to help people overcome some of the hurdles that they may come across every day, set goals, avoid scams, and reach the goal of giving their kids $1 million each.
See a licensed financial planner, if you can
Legally, I must advise readers to see a licensed financial planner before making any financial decisions, but this may not be much help for most ordinary Australians who can’t afford one. Most financial planners will only take on new clients if they already have at least $50,000 to $100,000 to invest. The financial planning industry is geared to dealing with clients with a lump sum to invest—from retrenchment, retirement, or an inheritance. For people who do have a lump sum to invest, receiving advice from a licensed financial planner is an absolute necessity. However, many ordinary Australians starting out with small amounts will simply not be able to afford one.
Most financial planners are controlled by fund management groups and sell their relatively expensive managed funds in return for sales commissions. They will generally not recommend the products used in this plan because they don’t pay a commission. Even “fee-for-service” financial planners are usually far too expensive for many ordinary Australians starting out on their investment journey. Many of them charge several thousand dollars for an initial plan and then several thousand dollars annually.
But all is not lost for ordinary Australians who can’t afford a financial planner. There are some very simple investments available that are often just as effective as and much cheaper than the expensive managed funds sold by financial planners.
Building long-term wealth need not be out of reach of ordinary Australians. This book will show you how.
Ashley Ormond
Sydney
August 2006
Praise for How to Give Your Kids $1 Million Each!
‘Ashley Ormond shows parents and grandparents how to set their offspring on course to understand, and benefit hugely from, the two Golden Rules of investing — start early and be disciplined. It’s a simple but effective approach which just about any family can use to learn about money and build long-term wealth.’
Dr Don Stammer, economist and investment commentator
‘A timely and practical introduction to investing with a distinct focus on long-term strategies — it will be particularly useful for anyone with an independent approach who wants to broaden their investing plans to include the future financial security of the whole family.’
James Kirby, editor, Eureka Report
‘A well-researched and informative piece, without the complexities of financial jargon. Topics ranging from savings and inflation, right through to finding the right equity investment, all are visited in this highly referenced guidebook. He outlines a number of effective growth assets to ensure a great return in the long run, enabling substantial financial backing for the kids and more control over their lives ... one of the most basic yet useful reference books out there on the market.’
Ailene Belesina, Your Mortgage Magazine
‘The book is a great way to teach your children the value of money and to get them involved in the savings routine from a very early age.’
Karina Barrymore, Herald Sun
‘His plan is simple, effective and smart. This book should be read by all parents—I’m an instant convert and am starting the plan immediately for my two bundles of joy!’ Tania Grieg, Fitness Life Magazine