Turn $25,000 into a $2 million bonanza.
I recently made a presentation to a group of parents, grandparents and young people from ages 16 to 25. The topic was essentially how to get a financial head start in life.
Based on more than 90 years of stock market history, I think it’s reasonable to expect that $25,000 you put in at the outset could be worth nearly $1.4 million by the time you are 65. Then let the young person pay this back over 20 years. That might seem like very long time, but remember the ultimate payoff is about $1.4 million. By my calculations, the 20-year annual repayment would be $2,217, which is a small burden for most adults in their 30s and 40s. I came up with the figure of $5,000 a year partly because it’s approximately what’s someone could put into an IRA every year, and partly because that number is easy to grasp.
I’m a parent, and also a grandparent, and I know that most of us may struggle to loan our kids or grandkids $25,000. And many young people don’t have anyone they can call on for such help. So what should they do? Well, here’s the deal:
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