Moments With Melody – December ’14

500k Calories vs. $1.7M – You Choose!

We all want to do things that will help our children and assure they “have a better life.” Everybody wants to save something for their children, but let’s face it raising children is an expensive endeavor. Pull-ups and pulled muscles; baseball and ballet slippers; learner’s permits and insurance… It makes a parent crazy! (Perhaps that’s why              teenagers think we don’t know anything.)

Most parents try to save a little something for their children, generally with an eye towards helping out with college expenses, but once again, I’m asking you to think beyond the obvious. Yes, college is expensive and requires           funding, but your child genius may be able to benefit from scholarships, grants, and student loans to complete        their education. A truly brilliant child will go to work after college for a company that will pay off that college debt!

I’m asking you to think about saving with an eye towards your child’s retirement. It’s not as difficult as you might   think. We’ve all heard the story how if you start out with one penny and double that amount every day, how rich      you’ll be. The problem is, there comes a point where the average person certainly doesn’t have the funds to double the saved amount. Here’s an easier and more practical plan – $1 a day for 18 years.

Can you afford to set aside $365 per year for your child? Let me give you a little more perspective on this number. Do you buy, on average, one fast food children’s meal per week? I know I did when my children were in school. By   the time you work late, get to all the afterschool activities, the volunteer and community service events, and            everything else that has to be fit in, it becomes very easy to go through the drive-through at McDonald’s (or your    fast food restaurant of choice) and pick up the meal with the toy for your young child. And the fast food price goes higher when your child hits the teen years. (The toy is no longer a sufficient bargaining tool!)

So, what is the math? First, the assumptions: We will assume that we are setting aside $365 per year from birth to age 18. We’ll assume this money grows at 10% per year. The 10% growth is for hypothetical purposes only and not indicative of any particular investment or performance. By age 18 you will have invested a total of $6,570 that        compounds at 10% a year, growing to be worth approximately $18,300. Now, the KEY assumption is that your truly brilliant child works part-time while in college and uses this money to fund a Roth IRA and then ignores it, allowing the funds to continue to grow. By the time your child has finished college, this money will have grown to approximately $29,500. Your child is already well on their way to retirement, and hasn’t even gotten “a real job” yet.

If your child continues to “ignore” this money and allows it to grow until retirement at age 66, you will have given   your child approximately $1,776,000. This assumes that the money grows at a long-term growth rate of 10%.         Some years will be less, some will be more. No returns are ever guaranteed. But, I can guarantee your child will be much happier with $1.7M in the bank, rather than 500k fast-food calories! The math on that – One meal with a       cheeseburger, kid fries and ketchup, apple slices and chocolate milk equates to 575 calories per meal times one     meal per week times 18 years equals 538,200 calories. (And again, the calories will go up in the teen years!)

I did a little more math. After all, markets are never certain and performance varies. If you assume an 8% growth     rate, you will end up with approximately $593,600 (almost equal to the calories your child will have consumed);      and more conservatively a 6% return will get you $196,000. Want to do less than $365? The current cost of a happy meal in my community, with tax, is $4.82. Take that times 52 weeks and it equates to $250.64. Set aside $250 for 18 years and you would have contributed $4,500. With an assumed10% growth rate, at age 66 that equals approximately $1.2 million.

I wish someone would have explained this math to me when my babies were born, so now I’m explaining it to you. And, if you explain it to your child’s grandparents and each set matched your contribution each year… Would you    like to borrow my calculator? Just give me a call! I’d love to discuss this savings option with you.

If you have questions or comments about this article, you may contact Melody Lowe at

Securities offered through Sigma Financial Corporation. Member FINRA/SIPC. Investment advisory services offered through Sigma Planning Corporation, a Registered Investment Advisor. Financial Partners, Inc. is an independent of SFC &SPC.