By: Ronald Reinstein MBA, CDFA, CSSCS 
Senior Wealth Manager 
The Financial Guys 

The first thing I did after my daughter finally got her social security number a couple of weeks after she was born was open a 529 Plan for her. Who knows what the cost of higher education will be for her eighteen years down the road. Call it a hunch, but I can not see the cost of college tuition being any less than what the current price tag is. What better time to get going on saving for college for her when she was only a couple of weeks old.

As we fast forward in time, dad will be having the same conversation with her about saving for retirement. Just as I am saving on a systematic basis for her college education, I will encourage her to do the same for her retirement and or just saving in general.  Saving two dollars a day will grow for her with compounding interest. So, if she is putting $60 a month into a mutual fund over an extended period of time, this could be quite the sum of money for her. Let’s look at an example here. 

Let’s assume she saves $60 a month ($2 dollars a day), over a 40-year period of time. And over this 40-year time frame she has a rate of return of 8%.  The future value of her account will be over $200,000!

To start the conversation off with my daughter I will ask if she would be able to have $2 a day less in her wallet. Or if she has $14 less per week in her wallet will this be missed? This is a small sum of money to start that is funding this account. It also gets her in the habit of saving and being smart and responsible with her money. Saving on a consistent and systematic basis is the most efficient way to save for retirement and or saving in general. Keep saving no matter what. Even if she cant do $2 a day, save $1 a day till you are able to go back to saving $2 a day!  

I encourage all parents, grandparents, family members etc to have the conversation with children on the value of money and how to be smart with saving it. Illustrate to them how money can grow with compounding returns. It is never to early to show them the power this possesses. The power of compounding rates of return hooked a young Warren Buffet many years ago.  That seemed to work out ok for him.