With the basic plan outlined in the book you can start investing with just $1 per day and turn it into $1million. The plan assumes you start when the kids are born (or as young as possible). It also assumes that the investments generate returns averaging 12% per year, which is the long term average total returns from share and property markets in Australia. The subject of investment returns is covered in detail in the book, using historical data going back over a century. The impact of taxes on investment returns is also covered extensively in the book.
The basic $1 per day plan can build into a fund worth $1million by the time the kids are 50 years old - in time for them to think about scaling down or taking early retirement, or starting a new business, etc. There are many ways to accelerate the plan and get to the $1million sooner. The book also outlines several ways of doing this and provides a number of examples.
There are essentially four ways to accelerate the plan and get to the $1million sooner:
1) start off with a lump sum if you can – even a few hundred dollars makes a huge difference.
2) contribute more than $1 per day – for example make them $40 or $50 per month if you can.
3) increase the contributions each year – eg. increase them by 5% or 10% each year.
4) Make additional contributions when you can – eg. part of a Christmas or birthday present as a contribution to the fund.
Note that we will NOT be trying to accelerate the plan by trying to get more than the benchmark 12% per year average returns from our investments because aiming for higher returns than the general market will involve additional risks. We don't want to be taking unnecessary risks with our kids' futures.
| Estimate the Number of Years it takes to reach $1million: | |
| There are 4 steps to find out how long the fund can take to reach $1million: | |
| 1. How much can you start the fund with? | |
| 2. How much can you contribute per month? | |
| 3. How much will contributions be increased each year? | |
| 4. How much can you contribute as an additional annual payment? | |
| (eg from christmas & birthday presents, from grandparents, etc) | |
| Use the tables below to find out how many years it will take to reach $1million: | |
Note that this is based on achieving total investment returns of 12% per year - averaged over the whole period. Of course, returns will vary from year to year but the overall average of 12% per year is the long term average achieved by shares and listed property investments over the long term in Australia. Also, past performance is no guarantee of future performance. Investment returns, inflation and taxes are covered in detail in the book.
You can see from these tables that you can build a fund worth $1million in around 30 years or less even if you start very small.
One thing I have found in talking to people thinking about starting the plan - many of them debate for ages about whether they should start with $1 per day, or $2 per day, our some other variation. It is much better to start out small and stick to the plan than to start out big and then not stick to it. Why not start the basic plan with just $1 per day, and then you can think about how to accelerate it, once it is up and running.
This type of plan can work for adults as well - over even shorter periods of time. The principles are the same. But the great thing about a plan for the kids is that you can start out very small and the kids have time on their sides.
In my second book - "1 million for life - how to make it, manage it, maximise it" - I outline a number of plans which can be used to reach the $1 million dollar target in as little as under 10 years.
Important Notice:
The book and this web-site is intended to provide general information only, to assist readers to make their own decisions and choices. It should not be construed as a recommendation or a statement of opinion, or a report of either of those things. It is not intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products. This web-site is intended for educational and instructional purposes only.
In preparing the information in this web-site, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual reader. Because of this, readers should, before acting on the information, consider the appropriateness of the information, having regard to the reader’s objectives, financial situation and needs. If the information relates to the acquisition, or possible acquisition, of a particular financial product, readers should obtain a Product Disclosure Statement relating to the product and consider the Statement before making any decision about whether to acquire the product. Readers should obtain individual financial advice from a licensed investment advisor, legal and tax advisors to determine whether information contained in this web-site is appropriate to their investment objectives, financial situation or particular needs.
The book and this web-site are not intended to constitute personal financial advice. They merely describe what has worked for the author. Where particular products or companies are mentioned, it is done so because they have been found by the author to be useful and/or they are used as examples of what may be available in the market.
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