buying FIRE for a child - about 70k

[Mr Mark]

Imagine you get a grandchild. Looking at cFIREcalc if you invested 70,000 in a 100% equity trust until they were 35, it should have about 500k in it. (2014 $)

This would support a withdrawal of about 2k a month from age 35 (2014 $) with 95+% success, with an 80/20 portfolio.

amazing that you can thus buy a basic FIRE (2k/mth from age 35 for ever inflation adjusted) for a child with just 70k, what some people spend on a car...

[milesdividendmd]

Mr Mark,

70K.  That's an interesting number.

This is a nice demonstration of the incredible power of compounding interest.

The crucial question is; if you had the means to give your grandchild financial independence at age 35, would you do it?

My instinct is no, because I think it would rob him or her of the opportunity to secure their own financial independence, which is probably more valuable than the achieving of financial independence itself.

What do you think?

[nereo]

amazing that you can thus buy a basic FIRE (2k/mth from age 35 for ever inflation adjusted) for a child with just 70k, what some people spend on a car...

Or consider this... if somebody's parents/grandparents/godparents put $10,000 into a fund when a baby was born, it would grow to over $812k by the time that child reached "normal' retirement age, a 4% SWR of $32,500.  While that child would still have to work and make decisions about how to pay for the majority of their adult life, their twilight years would be taken care of.

I agree with Mr Mark that I'm not sure i'd want to automatically gift someone an ER at the age of 35, but the idea of leaving someone a 'legacy' retirement is very appealing to me (and financially possible for a large % of grandparents).  Talk about giving a gift you will be remembered for decades after you are gone!

just continuing the thought exercise...

[iris lily]

It's a nice idea and I don't mean to stop anyone from doing it, I might do it myself.

But I think of the trust fund babies who don't use their money wisely and who fritter away their lives, and they are not a good role model for inherited wealth.

More importantly, I think of the people who are "promised" money and that can be a big killer of drive and worth ethic. Somehow the specter of money coming down the road messes with people's common sense.

I think a perfect way to do it would be to do it silently, and spring it on the offspring when he/she was 35 years old.

[nereo]

It's a nice idea and I don't mean to stop anyone from doing it, I might do it myself.

But I think of the trust fund babies who don't use their money wisely and who fritter away their lives, and they are not a good role model for inherited wealth.

More importantly, I think of the people who are "promised" money and that can be a big killer of drive and worth ethic. Somehow the specter of money coming down the road messes with people's common sense.

I think a perfect way to do it would be to do it silently, and spring it on the offspring when he/she was 35 years old.

I agree.  There's also ways of establishing 'benchmarks' that have to bit met, like the person needs to obtain a college degree and work X number of years and avoid any felonies.  a silent executor could oversee these benchmarks, and if the benefitiary failed to live up to these the money would be diverted to charity. The benefitiary wouldn't even have to know about any of it.  At least that's how I would do it, if I had a child/grandchild to will money to.

[cpa cat]

I disagree with others here. Think of yourself - if you knew that you had a trust fund that would start paying $2000 per month at age 35 (or more later, if you let it grow), would you become a spoiled rich brat?

First of all, that's not some obscene amount of money. Second of all, you had to get to 35 without it - and I would hope that your personality is set enough that you wouldn't be ruined by the evils of 24,000 extra dollars per year.

$24,000 per year is only financial independence if the child works to make it FI. If they don't, then it's just money - and not really enough money to change their lives.

[nereo]

I disagree with others here. Think of yourself - if you knew that you had a trust fund that would start paying $2000 per month at age 35 (or more later, if you let it grow), would you become a spoiled rich brat?

I actually was thinking about myself, and considering that a primary motivator for me in my formative years (here: age 12 - 22) was to save as much as I could for retirement because my parents showed me the "magic of compounding" early and I learned that I could become a millionaire if I just put my paper-route money into an IRA every year and let it compound.
If I had known at age 12 that I wouldn't need to do anything to be a millionaire before I turned 40, I think I might have bought more crap and saved far less.  If it were me, I would not have wanted to know about the windfall until well into my 20s, possibly not until 30.  I would want to know a few years before I could withdraw funds, so that I could take my time and plan how best to use them. 

Problem is - it's impossible to ever know for sure what you would be like if circumstances would have been different.

There's certainly a lot of evidence that students who work part-time through college do better than those that either have to pay the entire share or who have their parents pay everything for them.

[amha]

I actually was thinking about myself, and considering that a primary motivator for me in my formative years (here: age 12 - 22) was to save as much as I could for retirement because my parents showed me the "magic of compounding" early and I learned that I could become a millionaire if I just put my paper-route money into an IRA every year and let it compound.

Yup!!!! I still vividly remember the day (this must have been in the mid-90s) when my Dad showed me a basic Excel spreadsheet showing that very reasonable level of savings could easily compound into $1M. (I guess he must have read, or heard of, The Millionaire Next Door?)

[cpa cat]

If I had known at age 12 that I wouldn't need to do anything to be a millionaire before I turned 40, I think I might have bought more crap and saved far less.  If it were me, I would not have wanted to know about the windfall until well into my 20s, possibly not until 30.

I see your point. Furthermore, you don't know how much control you'll have over how the trust is communicated to the child. A Super Sekrit Trust is clearly the best of all worlds - but I would think it would be hard to pull off (not that I've ever tried!). The mere rumor that a trust is in place could have a a negative impact - because it leaves the child to imagine how large it is.

I suppose this is why most people don't set up trusts like this. When you start thinking about it - if I'm a grandparent, why wouldn't I invest that $70,000 in an account that I owned and then leave it to the kid in my will (in whole or as a trust) if I liked where he/she was headed.

[nereo]

If I had known at age 12 that I wouldn't need to do anything to be a millionaire before I turned 40, I think I might have bought more crap and saved far less.  If it were me, I would not have wanted to know about the windfall until well into my 20s, possibly not until 30.

I see your point. Furthermore, you don't know how much control you'll have over how the trust is communicated to the child. A Super Sekrit Trust is clearly the best of all worlds - but I would think it would be hard to pull off (not that I've ever tried!). The mere rumor that a trust is in place could have a a negative impact - because it leaves the child to imagine how large it is.

I suppose this is why most people don't set up trusts like this. When you start thinking about it - if I'm a grandparent, why wouldn't I invest that $70,000 in an account that I owned and then leave it to the kid in my will (in whole or as a trust) if I liked where he/she was headed.

For certain- rumors can ruin lots of things.  I'm guessing the best way of going about it would be to hire an executor who was not a family member - maybe a financial service (fee only, I hope) or something of the sort. 

You bring up a good point - just keeping control of your own assets and then gifting it (or leaving it in your will) might be the best plan, but it gets complicated if you don't plan on living long enough to see the child's 35th birthday (many grandparents, for example).  then once you die the gift is no longer a secret.  But it's an interesting thing to think about

[iris lily]

Yes, family secrets are a problem and they always come out.

My cousin, who is now worth millions (don't know how many but I'm guessing 20 - 30mm ) had a "trust fund"  and I always wondered how much was in it.
Now in his case, he is the original Mustachian. He went to community college, then finished up at the local 4 year (pricey) University but lived at home. Then he went into banking and finance for a few years, bailed on that to do entrepreneurial things. So he is an example of how money doesn't ruin someone. He and his daughter shop the two-for-one days at Goodwill, for instance.

His daughter has no idea how much she will inherit. No idea. Still, I'm sure that some people have made quiet side side remarks to her about  how she won't have to worry about money and etc, and that's not a good thing. But she is a good kid and will do fine because her parents are down to earth.

Much of this common sense has to do with living in the Midwest where the Millionaires Next Door really do look like you and me. And my cousin's wealth was built by his parents who were blue collar, it's not as though our family has expectations of how People Must Live.

[Mr Mark]

I thought a couple of things:

- if everyone somehow could have paid 70k into such a trust fund at birth, that sorts a lot of problems later on!
- its interesting how we worry about the effect. It begs the question, why is employment such a defining feature? And it speaks to our own FIRE plans, as many of us perhaps now know we have such a trust fund ourselves!

it asks us to define what we want to do with our lives without the justification that we need the job to survive.

Wouldnt it be better to raise the child to be mustashian? It would change, perhaps, what you would want to study.

But mainly it was just a nice thought experiment to explain the awesome power of compounding interest and dividends... :-)

[milesdividendmd]

Mr Mark,

That's an interesting point about the use of work to justify one's own existence.

On the other hand, I think that there is tremendous value in being your own sugardaddy, and not so much value having someone else do your saving for you.

A trust fund that you create for yourself is by definition something very different from one that you inherit.  (It usually implies frugality, efficiency, and not buying-in to prevailing cultural ideas about consumption.) 

Furthermore I think work is important, even after employment.  (MMM is a good example to look up to here.)

Here is something that I wrote about the meaning of work for me personally.  It seems germaine to this thread...

[MOD EDIT: Link removed.  Please stop spamming links promoting your own site.  A single link in your signature is sufficient, and will be under every post you make.  Thanks.]

In my view a "mustachian" and a "trust fund baby," are quite different things, and personally I only desire to have my kids/grand kids emulate one of them.

Good stuff,

Alexi

[Left]

It's a nice idea and I don't mean to stop anyone from doing it, I might do it myself.

But I think of the trust fund babies who don't use their money wisely and who fritter away their lives, and they are not a good role model for inherited wealth.

More importantly, I think of the people who are "promised" money and that can be a big killer of drive and worth ethic. Somehow the specter of money coming down the road messes with people's common sense.

I think a perfect way to do it would be to do it silently, and spring it on the offspring when he/she was 35 years old.

you don't have to tell them about it, just leave it in the will?

[hodedofome]

Just my opinion but a lot of this has to do with parenting skills and instilling the right values into your kids. It doesn't matter how much money you have, your kids could grow up poor and greedy, or rich and greedy. They can grow up wealthy with a work ethic and drive, or they can grow up poor and lazy. In the end it's not about the money, but the values. These can be taught and while every child eventually has to choose their own path, it is typically the one that they were brought up on.

So what I'm saying is that we should teach our kids to live simply, work diligently, and give generously. Whatever money is passed on to them should not change who they are and what they will do with it. If we've trained them well in what money is, and what it's supposed to be used for, then a lot of the problems that most of the snobby rich kids have should not show up in our families.

Personally, I want to be a billionaire. Set up a private foundation so that most all of it is given away, and if my kids want to run it for a modest salary after I'm gone, then my wealth will have provided for their basic needs but not all their wants. There's a saying at my church that we want to provide for your needs, but you need to trust God for your wants (read: work for it kid).

[Jags4186]

Most people have children in the late 20s early 30s.  I don't know how many people in their late 20s, early 30s, have 70k earmarked for someone else.  70k for a downpayment?  Probably.  70k in 401k?  Hopefully.  70k to give away?  Unlikely.

As a mustachian, you would be working an extra year or 2 yourself to make up for that 70k "gift".  Doesn't seem too mustachian to me!  Besides, true mustachians will likely leave their children a big sum of money upon their death.  What's so bad about that?

[Mr Mark]

Ahhh, yes, which is why I set it up as a grandchild. We often focus on the downside outcome of CFIREcalc, but there are a lot of big winners out there. Some of them are now so luxurious in the stache, 70k would be a doddle.

I was mainly amazed how low the number was.

[arebelspy]

I was mainly amazed how low the number was.

Ditto.  I was blown away by that as well, so thanks for posting.

Two eye popping stats:

amazing that you can thus buy a basic FIRE (2k/mth from age 35 for ever inflation adjusted) for a child with just 70k, what some people spend on a car...

Or consider this... if somebody's parents/grandparents/godparents put $10,000 into a fund when a baby was born, it would grow to over $812k by the time that child reached "normal' retirement age, a 4% SWR of $32,500.  While that child would still have to work and make decisions about how to pay for the majority of their adult life, their twilight years would be taken care of.

Definitely neat.

[aclarridge]

Maybe at some point in the future, some government will require an amount of capital to be invested, maybe in a locked away portfolio, before a couple is allowed to have a kid. Sounds like taking away a basic freedom, but imagine if the "basic income" idea was funded in this way. It might be a pretty cool society.

Anyway yeah I am also blown away by compound interest...35 years is a long time I guess. If I was doing it though I would just keep everything in my name, not tell the kid about it, only give it to them if I think it won't be wasted. Otherwise it's going to some kind of charity.

[hodedofome]

A dollar compounded at inflation (3%) over 1000 years ends up being $6.7 trillion bucks. Unfortunately we can't ever expect our ancestors to have that much money passed down to them because paper currencies become worthless and everything eventually 'resets.' It's why dynastic wealth (like Rothschilds and Rockefellers and others) only gets passed down through hard assets and businesses. Those families are bankers, land owners, shippers, or sell some sort of consumer goods that can create income for a long time. It's great that we can pass financial assets down to our kids, but if history is any guide somewhere along the way those pieces of paper may not be worth much.

[Gin1984]

Most people have children in the late 20s early 30s.  I don't know how many people in their late 20s, early 30s, have 70k earmarked for someone else.  70k for a downpayment?  Probably.  70k in 401k?  Hopefully.  70k to give away?  Unlikely.

As a mustachian, you would be working an extra year or 2 yourself to make up for that 70k "gift".  Doesn't seem too mustachian to me!  Besides, true mustachians will likely leave their children a big sum of money upon their death.  What's so bad about that?

Mustachian does not mean not working.  MMM works, but he is financially independent so he does not have to work. 

[aclarridge]

A dollar compounded at inflation (3%) over 1000 years ends up being $6.7 trillion bucks. Unfortunately we can't ever expect our ancestors to have that much money passed down to them because paper currencies become worthless and everything eventually 'resets.' It's why dynastic wealth (like Rothschilds and Rockefellers and others) only gets passed down through hard assets and businesses. Those families are bankers, land owners, shippers, or sell some sort of consumer goods that can create income for a long time. It's great that we can pass financial assets down to our kids, but if history is any guide somewhere along the way those pieces of paper may not be worth much.

But it's not "pieces of paper", it's shares in index funds, i.e. pieces of businesses and bonds, and it's ever-adapting to the businesses and bonds of the time. As long as we have capital markets it should still exist.

[hodedofome]

A dollar compounded at inflation (3%) over 1000 years ends up being $6.7 trillion bucks. Unfortunately we can't ever expect our ancestors to have that much money passed down to them because paper currencies become worthless and everything eventually 'resets.' It's why dynastic wealth (like Rothschilds and Rockefellers and others) only gets passed down through hard assets and businesses. Those families are bankers, land owners, shippers, or sell some sort of consumer goods that can create income for a long time. It's great that we can pass financial assets down to our kids, but if history is any guide somewhere along the way those pieces of paper may not be worth much.

But it's not "pieces of paper", it's shares in index funds, i.e. pieces of businesses and bonds, and it's ever-adapting to the businesses and bonds of the time. As long as we have capital markets it should still exist.

I knew someone would say that. And I agree with you that technically we are owning pieces of companies. Yet that's the whole point of black swans/fat tail events. We don't know what they will be, or what they will do. The families that have passed down wealth through generations did not do it through the stock market. That's all I'm saying here.

This is all just theoretical talk from me though. I am not in a position, nor may I ever be, to pass down land, gold, art and entire businesses to my descendants. And I don't know if I'd want to even if I had it.

[Jags4186]

Most people have children in the late 20s early 30s.  I don't know how many people in their late 20s, early 30s, have 70k earmarked for someone else.  70k for a downpayment?  Probably.  70k in 401k?  Hopefully.  70k to give away?  Unlikely.

As a mustachian, you would be working an extra year or 2 yourself to make up for that 70k "gift".  Doesn't seem too mustachian to me!  Besides, true mustachians will likely leave their children a big sum of money upon their death.  What's so bad about that?

Mustachian does not mean not working.  MMM works, but he is financially independent so he does not have to work.

I know it doesn't mean not working, but it means being able to do what you want, whether it be continue working your day job, working a part time job that pays, working a part time job that doesn't pay, volunteer work, etc.  If someone came on here and said they made a financial decision that forced them to work their full time day job years longer, that would get massive face punches.

[EscapeVelocity2020]

While I agree that, had my parents put 70k in equities in 1979 and left it until today, it would be worth almost 1.3 million nominally (S&P went from roughly 103 to 1890).  And I understand how Monte Carlo simulations work.  The only niggling detail in all of this, are we saying that investing 70k today is the same as it was investing it in 1979?

Although a 95+% confidence interval is fine and dandy if we pretend that we don't know anything about how today compares to the rolling historic periods, but we do know we are in an era of higher than average CAPE (typically correlating to lower equity returns) and low bond yields (risk free low returns), so I would hazard to guess the outcome will not be as good in the next 35 years as it was in the preceding 35 and, just to go full on gloomy, we are more likely in a period that puts us in the 5% failure band.  I realize I'm trying to predict the market, so I'm not running out and buying ammo and soup, but I'm also not rushing to put 70k in a trust fund and take the remaining money to buy cigars.  They will inherit what is left over after all is said and done. 

This would have been a fantastic post back in May 1979 though :)     

[arebelspy]

If someone came on here and said they made a financial decision that forced them to work their full time day job years longer, that would get massive face punches.

Every financial decision you make beyond living under a bridge has you working your full time job for more time. 

I don't see this as any different than paying for a child's college (which some of us are for, some against, but we don't facepunch those who insist they want to pay for their kids' college) or an older relatives' care, or have enough for travel in FIRE.  70k saved now adds only 2800 to your budget in FIRE at a 4% SWR.. we don't facepunch people for having a 2800 travel budget in FIRE.

I certainly wouldn't facepunch someone for spending an extra year working for something important to them (likely less, at the size their stache should be and rate it's compounding).  I may encourage them to rethink why they are doing that, and if it's really going to help their child or not, but if it's important to them, go for it.

[frugalnacho]

Boy would it have been nice if my parents made me work my ass off, learn to be frugal and appreciate what I got, and make my own way in life...but then on my 30th bday drop the bomb on me that I have a trust fund with enough to be FIRE (on top of what I've already earned).   I feel like I could have the best of both worlds that way, and with minimal effort I could do the same for each of my children. 

[Reepekg]

Challenge accepted! I am going to try to do this... not the exact numbers Mr Mark uses, but an FI (not rich person) trust fund of some description.

I've already started a similar project to combat all the complainypants 'education is too expensive' whining. For $60/week, I can afford to send 2 kids to my alma mater (currently $62k/year) in 2036. I'm 29, just married with no kids yet, and have been making the money refereeing soccer games (read: paid fitness workouts). Less than a year into the project, I'm at $2715.

[Gin1984]

Challenge accepted! I am going to try to do this... not the exact numbers Mr Mark uses, but an FI (not rich person) trust fund of some description.

I've already started a similar project to combat all the complainypants 'education is too expensive' whining. For $60/week, I can afford to send 2 kids to my alma mater (currently $62k/year) in 2036. I'm 29, just married with no kids yet, and have been making the money refereeing soccer games (read: paid fitness workouts). Less than a year into the project, I'm at $2715.

Congrats!

[Mr Mark]

Boy would it have been nice if my parents made me work my ass off, learn to be frugal and appreciate what I got, and make my own way in life...but then on my 30th bday drop the bomb on me that I have a trust fund with enough to be FIRE (on top of what I've already earned).   I feel like I could have the best of both worlds that way, and with minimal effort I could do the same for each of my children.

awesome.

[Jack]

If I were worried about a trust fund ruining the recipient's work ethic, I'd just make a rule that disbursements were only allowed to match the recipient's earned income. Maybe even only a percentage match. "Hey Jack Jr., you want your $20k this year? Okay then, you'd better earn $80k yourself first!"

(If the trust were large enough, I'd also put in a "Brewster's Millions" clause.)

Re dynastic wealth: It seems to me that over those sorts of time scales, the type of risk that starts to dominate is government/societal stability risk. You need to hedge against things like your country losing an all-out war or the proletariat deciding to confiscate your wealth or things like that.

[nereo]

I've already started a similar project to combat all the complainypants 'education is too expensive' whining. For $60/week, I can afford to send 2 kids to my alma mater (currently $62k/year) in 2036. I'm 29, just married with no kids yet, and have been making the money refereeing soccer games (read: paid fitness workouts). Less than a year into the project, I'm at $2715.

Good for you!  Yes, I've often been a bit incredulous when people tell me they simply can't afford to pay for their children's college.  I've always suspected it was a lack of planning, not a lack of resources.  Your example helps support that.

[RealCanadianSavings]

I've often been a bit incredulous when people tell me they simply can't afford to pay for their children's college.  I've always suspected it was a lack of planning, not a lack of resources.  Your example helps support that.

That's really what a lot of mustachianism is about I think. Planning, understanding the value of a dollar, focusing on priorities.

My father had So. Much. Money. And not much investment common sense. He bought his children trinkets instead of investing in their futures. After all the wealth was long gone, I remember working out how much it would cost me to stay in university for 1 more year. (I had finished a BSc, but wanted a double major. My mom had been helping me out, so I was still very lucky in a number of respects.) My alternative was to take the education I had and start working - and that's what I did.

If I'm lucky enough to have kids one day, I'll help them with their education. I'm always going to be frugal, and I hope that will rub off. But I want to help them pursue those big dreams and not feel limited by the need to buy the very basics in life.

[abhe8]

Boy would it have been nice if my parents made me work my ass off, learn to be frugal and appreciate what I got, and make my own way in life...but then on my 30th bday drop the bomb on me that I have a trust fund with enough to be FIRE (on top of what I've already earned).   I feel like I could have the best of both worlds that way, and with minimal effort I could do the same for each of my children.

love it!!

my biggest goal right now (well, after paying off MY student loans and building my stach) is to teach my children to love hard work and saving their money. i don't feel like I learned this as a kid, and to be honest, i would still love to spend my money on pretty things. but how is the question. as always, I appreciate the wisdom and encouragement around here!!! i have found a daily (or weekly) dose of skimming the face punches and investment advice is very motivating.

[MrsCoolCat]

Nice! Now I just need to find and save up that $70k to invest into my future children! Geeze...

[Keekster]

Sorry to put a damper on this, but an estate has to pay taxes on the income it produces from investing in the stock market. So all the gains to get from 70k to 500k will be taxed. This will result in either a starting sum higher than 70k or an age higher than 35.

What sucks even more is that all the gains an estate produces is taxed at the highest rate (~35%). There is no marginal step up rate where the first 10k you pay 10%, then the next 70k you pay 20%, etc.

Someone should re-run this scenario taking in effect the taxes paid...

[Wile E. Coyote]

Sorry to put a damper on this, but an estate has to pay taxes on the income it produces from investing in the stock market. So all the gains to get from 70k to 500k will be taxed. This will result in either a starting sum higher than 70k or an age higher than 35.

What sucks even more is that all the gains an estate produces is taxed at the highest rate (~35%). There is no marginal step up rate where the first 10k you pay 10%, then the next 70k you pay 20%, etc.

Someone should re-run this scenario taking in effect the taxes paid...

I am not sure I follow the point you are trying to make. Taxes should certainly be considered, but The estate tax exemption is around $5 million right now, I believe, and it's not a tax on income, but on assets.  Now the income earned on the $70m could be taxed each year depending on what kind of income it is (e.g., dividends, interest) but not if it is simply increasing in vaue (e.g., capital gains) unless there is a recognition event (e.g., a sale).  I imagine some states may have different estate tax rules, that would need to be considered as well..

[Abe]

My parents did a similar thing when I was very young. Being uninterested in buying things, I have so far left the money alone except for a down-payment. Instead, I found a career that is difficult, rewarding and ultimately should provide more money than my inheritance (and more than I would ever spend). Once I learned about investing and compound interest, my goal was to pass that fund on to my children or further. My sister also has money and showed promise early on, but has become complacent. She will have enough money to live a middle-class life, but not the lifestyle she lives now. Overall, if a family can do this it is probably worth it; the child's personality will be the biggest factor in how they perform.

[sdp]

70K sounds like not very much, but in 35 years, 2K/ month probably wont be very much either.  35 years ago, 70grand was equivalent to over 227,000 today, that's why the numbers seemed so shockingly small, a lot of inflation has happened over the last 35 years, and I expect a lot more to happen over the next 35....

[EDSMedS]

DW and I have been investing $2,400/yr for our (potential) future child, mainly for education but I would prefer that he/she travels first.  By the time we are even planning on having a kid there will be ~$10K in the fund!

We will NOT be saying a damn word about it to him/her.  He/she will have no clue that there is a pile of moolah waiting for him/her, but he/she WILL know that when they come to us with a need, an idea supported by a good plan, or a long-term goal, that he/she will be financially supported.

Compound interest is easy!  I can't wait to find out how difficult (easy?) it is to raise an intelligent, active, compassionate little human in a world focused on greed, selfishness, and sloth.

[brooklynguy]

70K sounds like not very much, but in 35 years, 2K/ month probably wont be very much either.  35 years ago, 70grand was equivalent to over 227,000 today, that's why the numbers seemed so shockingly small, a lot of inflation has happened over the last 35 years, and I expect a lot more to happen over the next 35....

No - all of the stated figures have already been adjusted for inflation.

[Joan-eh?]

I think gradation should be worked into wills/estate planning as well. My parents' will was gradated till i was 40. - releasing small chunks at a time. Thankfully, They are still here, but Just knowing it was gradual release taught me about money.

[Jeremy]

I did a similar analysis for paying for college for our unborn child.  I think the number was ~25k invested at conception would pay for tuition and room and board for a 4 year private university at age 18.  We don't actually invest this in a separate account, it is just part of the portfolio

I suppose technically that 70k is also there, but I like Warren Buffett's perspective on this: 
"A very rich person should leave his kids enough to do anything but not enough to do nothing”

We have probably 12-15 years to instill our core values by example, and then after that it will probably be out of our hands.  Wish us luck :)

[innerscorecard]

I did a similar analysis for paying for college for our unborn child.  I think the number was ~25k invested at conception would pay for tuition and room and board for a 4 year private university at age 18.  We don't actually invest this in a separate account, it is just part of the portfolio

I suppose technically that 70k is also there, but I like Warren Buffett's perspective on this: 
"A very rich person should leave his kids enough to do anything but not enough to do nothing”

We have probably 12-15 years to instill our core values by example, and then after that it will probably be out of our hands.  Wish us luck :)

Since you have such a low earned income your child might just get 100% need-based aid anyways if he or she goes to an elite private university.

[Jeremy]

I did a similar analysis for paying for college for our unborn child.  I think the number was ~25k invested at conception would pay for tuition and room and board for a 4 year private university at age 18.  We don't actually invest this in a separate account, it is just part of the portfolio

I suppose technically that 70k is also there, but I like Warren Buffett's perspective on this: 
"A very rich person should leave his kids enough to do anything but not enough to do nothing”

We have probably 12-15 years to instill our core values by example, and then after that it will probably be out of our hands.  Wish us luck :)

Since you have such a low earned income your child might just get 100% need-based aid anyways if he or she goes to an elite private university.

I haven't looked at all at how need-based aid is determined.  I believe they look at both income and assets?

I'd like to think we would decline need-based aid, under the assumption that if we didn't take it then it would be given to somebody that really needs it.  Moment of truth in T-18 years

[nereo]

I haven't looked at all at how need-based aid is determined.  I believe they look at both income and assets?

I'd like to think we would decline need-based aid, under the assumption that if we didn't take it then it would be given to somebody that really needs it.  Moment of truth in T-18 years

Depends on the university.  Stanford and Harvard admit students students based on merit only (supposedly) and then offer reduced or free tuition on a need-based formula, so you wouldn't be preventing some other child from getting the funding; it would come from the university's endowment.  Harvard's endowment sits at over $35B right now. I applaud you for thinking about how your actions will affect those less needy than you.

[Jeremy]

Sweet, I'll put Stanford and Harvard at the top of the list!

[MayDay]

Sweet, I'll put Stanford and Harvard at the top of the list!

Princeton too. Probably others. Supposedly they even help with incidenals that are difficult/impossible for truly poor kids to cover.