Put away some cash for your newborn - it adds up
HAVE you ever thought about putting money away for a newborn baby? Can you believe that investing just $2.83 a day ($1000 a year) could grow to a small fortune? Yes it can!
Suppose your child had been born in October 1981 and you invested $2.83 a day for him into an investment that matched the All Industrial Accumulation Index. On his first birthday the portfolio would have been worth just $1004 - at that stage you may have become bored with the project and stopped.
However, if you'd kept going, the sum would have been $12 000 on his fifth birthday, $25 000 on his 10th birthday, $53 000 on his 15th birthday and a whopping $107 000 on his 21st birthday.
Today the investment would have grown to $276,000.
What is so good about investing in the All Ordinaries Accumulation Fund is that anybody can do. No special skills are required and you don't have to be a wizard at stock picking. All you have to do is to talk your adviser and choose a fund that is appropriate for your own situation, and then invest all the dividends. By definition the index cannot go broke and historically has returned an average of 9% a year,
Check the calculations for yourself on my website. Just go to Stock Exchange Calculators - Dollar Cost Averaging - and pick a starting and finishing date and a hypothetical sum to invest.
Why did I pick October 1981? Because that's the year my eldest son Mark was born.
Here's the bad news - like most parents, I "never got around" to doing it. Believe me, when the grandchildren come, I'll start it immediately.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: email@example.com.