"How to give your kids $1 million – Each!”
by Ashley Ormond
294 pages
Published by Wrightbooks (an imprint of John Wiley & Sons) - Brisbane, Australia
ISBN 0 7314 0538 2
Published July 2006
1. First of all – what’s NOT in the book
This is not a get-rich-quick scheme. It takes many years of patient investing to build real wealth. The plan is designed for people who want to build wealth over their whole lives. The “time horizon” for the plan is 30 to 50 years. Although the plan is primarily designed for people starting out with just $1 per day, it can also be used for people who are can start with a lump sum, and a shorter term time horizon in mind (say 10 years).
The plan doesn’t use any tricks or complex products. There are no seminars, courses, or trading systems you need to buy. The plan doesn’t contain any brilliant new ideas which people won’t find anywhere else.
The book does NOT contain grand promises to reveal things like:
§ the ‘seven secrets of success’, or
§ the ‘three hidden principles’ or
§ the ‘nine magic keys to wealth’ or
§ the ‘ten things wealthy people know that you don’t’,
§ or anything so dramatic.
There are no such things in real life.
This plan to build real long term wealth is based on some very old and very simple ideas and virtually anybody can do it. The investment products used in the plan are relatively simple, low cost, tax effective low-maintenance products which are available to virtually everybody – including very small investors.
2. Summary
This book is a step by step guide to help you and your kids generate wealth. It’s a simple plan and just about anybody can do it. You can start with as little as $1. It doesn’t matter how much you earn or how much money you have – there is a simple way for you to be able to give your kids $1million each! And it won’t cost you a cent. You can give them much more than $1million – you can also give them the knowledge and skills to be able to keep it, manage it and make it grow.
The book is packed with information and useful tips about money and finance. You and your kids will learn about saving, investing, inflation, taxes, risk, how to find good investments, and how to avoid the scams. It will help you wade through the hundreds of different types of accounts and products on the market - to find simple, low-cost, low-maintenance, tax-effective investments which can get you and your kids to the $1million target. The plan doesn’t use any tricks or complex products or ‘get-rich-quick’ schemes or trading systems.
It shows how to invest in shares without using managed funds or stockbrokers or having to pick individual shares if you don’t want to, and how to invest in property without borrowing, or having to worry about agents or tenants.
The earlier you start the better. You can start the plan with as little as $1 when your kids are born, and really give them a head start in life!
3. Audio files:
You can listen to the author talk about the plan by clicking on the 4 audio files below:
1 - Intro (3:48 minutes)
2 - One dollar per day (3:29 minutes)
3 - Investments (3:12 minutes)
4 - About the Author (1:34 minutes)
Left click the files to play (will start playing on Windows Media Player, RealPlayer, Quicktime or iTunes, depending on how you have set up your computer)
Or you can Right click the files to Save to your computer, then you can play later or transfer to your iPod, etc.
Don't forget to turn up the volume on your speakers...
4. How the plan works
The plan has been designed to enable people to invest for the long term by starting out very small. They don’t have to start rich to start. Virtually anybody can start a long term investment plan with as little as $1 per day. One ideal way to use the plan is for parents to create wealth for their kids by starting off with the plan when the kids are born.
The problem is that there are thousands of products and investments on the market, and it is often hard for ordinary investors to know which will work for them. By following the plan, ordinary investors can learn about saving, investing, inflation, taxes, risk, how to find good investments, and how to avoid the scams. It will help people wade through the thousands of different accounts and products on the market - to find simple, low-cost, low-maintenance, tax-effective investments which can help build wealth over the long term. The plan shows how small investors can invest in shares without using managed funds, or stockbrokers, or having to pick individual shares if they don’t want to; and how small investors can invest in property without borrowing, or buying “flats off the plan”, or having to worrying about real estate agents or tenants.
This plan is not intended to take the place of superannuation (retirement savings accounts). Superannuation should be the foundation for retirement savings for every Australian. This plan is designed to supplement Super and allow people to invest for the long term, but also have the benefit of access, flexibility and control over their money.
1. Can start with just $1 per day
Even just $1 per day can be turned into $1 million over 50 years if invested wisely. The $1million target can be reached much more quickly if more than $1 per day is put in. The book outlines numerous ways that people can come up with $1 per day. The plan takes people through some budgeting techniques to help identify where the money goes. It also focuses on the importance of paying off non-tax-deductible debts, identifying “good debt” versus “bad debt”, and building good financial habits – like not carrying debt on credit cards, not borrowing to buy depreciating assets, etc.
The book sets out many of the government benefits available to many Australians and provides web sites and contact numbers of useful services.
Generally the problem is not identifying amounts to free up for investment plans, the main problem is having the discipline and commitment to start the plan and stick to the plan over the long term.
Investors using the plan will learn to put money into three categories:
a) ‘Investing’ (putting money away for the long term – never to be spent),
b) ‘Savings’ (putting money away to buy things later, or for emergencies), and
c) ‘Spending Money’ (for day-to-day living expenses).
2. See a licensed Financial Planner if you can
Legally, we must advise all readers to “see a licensed financial planner” before making any financial decisions – but that’s not much good for most ordinary people who can’t afford one. Most financial planners will only take on new clients if they already have at least $100,000 or so to invest. The financial planning industry is geared toward dealing with clients with a lump sum to invest – from retrenchment, retirement, an inheritance, or a super fund to churn. For people who have a lump sum to invest, then getting advice from a licensed financial planner is an absolute necessity. However ordinary people, starting out with nothing and with just $1 or so per day to invest, will not be able to afford a financial planner.
Most financial planners are controlled by fund management groups and sell their expensive managed funds in return for sales commissions. They will generally not recommend the products used in this plan because the products used in the plan don’t pay sales commissions. That’s the main way they keep costs and fees down for investors. Even “fee-for-service” financial planners are far too expensive for ordinary Australians starting out on their investment journey. They generally charge several thousand dollars for an initial plan (either charged at a flat rate or around $300 or more per hour times several hours), and then several thousand dollars annually as well.
But all is not lost for ordinary Australians who can’t afford a financial planner. Fortunately there are some very simple and effective investments available, which are just as effective and much lower cost than the expensive managed funds sold by financial planners.
3. Investments
Coming up with the $1 per day is one thing, but investing it in assets which will grow to build real wealth over the long term is a different matter. The book outlines how readers can set up the “three basic building blocks” of the plan. These are the three components which allow ordinary investors to make investments. Once the three basic building blocks are put in place, we can now start investing. The investments used in the plan follow the following principles:
Low cost, no sales commissions, no up-front fees.
Products which are accessible by small investors – with only $500 or so per investment in the early years.
Focus on investments with long track records – several decades at least.
Focus on investments which are diversified and/or track the “index” which, over the long term, outperforms expensive “active” managed funds.
Diversification - across the major growth asset classes, across a number of investments within each asset class, and within each investment.
The plan focuses on the two main types of growth investments - shares and property. The book takes readers through the different ways of investing in these asset classes. It also looks at returns from listed shares and property over the past 100+ years in Australia. It takes readers through the sorts of returns they can expect, the risks and volatility they can expect along the way.
For each of the products used in the plan, the book goes much further than other books on the market. It goes through the products available, provides details and lists the products which can work with the plan. It names names, and provides a practical step-by-step guide to actually putting the plan into action. The web-site will keep the information up to date.
The plan also sets out what the asset allocation (between the major investment classes used: shares, property and cash) might look like at various stages as they follow the plan and growth the fund over many years.
4. Learning about investing
The book also takes readers through the basics of investing, including the following topics:
The book starts from the basics and uses everyday examples to illustrate key points.
Find out how you can Accelerate the Plan!
4. Book Table of Contents:
Part 1 – On Your Marks
Chapter 1 – Giving your kids $1million each
1.1 The plan
1.2 The hard parts of the plan
1.3 The rules
1.4 As the kids grow up
1.5 Paying back out loan
1.6 The kids won’t learn this at school
1.7 What does ‘wealth’ mean?
1.8 How much is ‘wealthy’?
1.9 Key Points
Part 2 – Get Ready
Chapter 2 – Finding $1 per day
2.1 Bringing up kids is expensive
2.2 Government assistance
2.3 Parents’ commitment for the first 10-15 years
2.4 Loose change
2.5 The drinks are on us
2.6 Smoking
2.7 Gambling
2.8 Salary deductions and direct debits
2.9 Budgets
2.10 Grandparents – do it for your grandkids
2.11 Time to set goals
2.12 Key points
Part 3 – Get Set
Chapter 3 – Getting started
3.1 What about paying off our debts first?
3.2 In whose name should accounts be opened?
3.3 One parent or both parents?
3.4 Trustee and beneficiary
3.5 Tax on kids
3.6 Tax file numbers for kids
3.7 Cash account
3.8 Cash accounts that work with the plan
3.9 Cash account tests
3.10 Interest rates
3.11 Opening the cash account
3.12 Bank statements
3.13 Online broker account
3.14 Online broker account and cash account combinations that work
3.15 Opening the online broker account
3.16 Key points
Chapter 4 – Investment basics
4.1 Ready to invest
4.2 Inflation
4.3 Tax
4.4 Capital and Income
4.5 Investment returns
4.6 Compounding
4.7 Prove that the $1 per day plan really works
4.8 Risk
4.9 Main types of investments
4.10 Other types of investments
4.11 Investing versus trading
4.12 Key points
Part 4 – Go!
Chapter 5 – Company shares
5.1 Shares
5.2 Dividends
5.3 Choose from many companies
5.4 Investment returns from shares
5.5 Investing in shares while the fund is still small
5.6 Managed share funds
5.7 Financial planners
5.8 Index funds
5.9 Are active managed funds worth all the fees?
5.10 Full-service stockbrokers
5.11 Exchange traded funds
5.12 Listed investment companies
5.13 Direct shares
5.14 International shares
5.15 Shares – summary of the plan
5.16 Buying investments on the ASX
5.17 What happens after you buy shares?
5.18 How often should you check the share price?
5.19 Key points
Chapter 6 – Property
6.1 Property
6.2 Property versus shares
6.3 Listed property funds and trusts
6.4 The main listed property trusts
6.5 Investment returns from property
6.6 Investing in both shares and property
6.7 Tax benefits of property
6.8 Unlisted property funds and trusts
6.9 Key points
Chapter 7 – How the fund grows over time
7.1 Year 1 – under $500
7.2 Years 2 to 5 - $500 to $3,000
7.3 Years 6 to 10 - $3,000 to $10,000
7.4 Years 11 to 20 - $10,000 to $30,000
7.5 Years 21 to 30 - $30,000 to $100,000
7.6 Years 31 onwards – the race to $1million
7.7 Risks involved in the plan
7.8 Key points
Chapter 8 – Handing the plan over to the kids
8.1 When should we tell the kids?
8.2 Introducing the $1 per day plan to the kids
8.3 Lesson 1
8.4 Lesson 2
8.5 Lesson 3
8.6 Lesson 4
8.7 Lesson 5
8.8 Lesson 6
8.9 Lesson 7
8.10 Child’s commitment and goals
8.11 Child’s ongoing involvement
8.12 Key points
Chapter 9 – Where to find out more
9.1 Drowning in a sea of information
9.2 Useful books
9.3 Information services
9.4 Key points
Glossary
Index
5. Some Sample Pages:
Examples of how the book helps readers put the plan into practice -
1. It is full of tables and charts to illustrate key points: Eg:
2. There are several quizzes and exercises for the kids to get involved in – to make learning interesting. For example:
3. It includes step by step guidance to help readers actually put the plan into place. Eg:
4. The book is very practical – it spells out products and names individual products and investments which can work with the plan. Eg.
5. There are also several practical tools – like charts and tables that readers can use to help implement and keep track of the plan. Eg:
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