$250 per child, at 5% interest rate, compounded in 18 years, you'd get $601.65.
Even in today's money, I wouldn't call it a "head start"
Even in today's money, I wouldn't call it a "head start"
It's also tax-free growth (not that the average <18 y/o would incur any tax on $250-$1250 of principle)
This is largely separate from your point, which is good, but the $250 is for kids that won't get the $1000. The $1000 only goes to kids born between 2025 and 2028.
The stock market is at ~9.5% returns historically, inflation is likely at ~3% historically, so assume a little higher at 6.5% and that $1000 with a dollar a day increase is then ~$14,800, inflation adjusted.
If you go up to ~$100/mo at 6.5%, then you get ~$42,000, which is an honest start to a small business or college tuition.
The little extra per month really adds up here!
I may not like the administration for a lot of things, but this is one thing that I can really get behind.
If you put in $30.00 / mo , a dollar a day, then it goes all the way up to $10,700 , a 18x increase (42x over the $250)
Look, we can play with numbers all day long here.
The fundamental difference is the additional contribution amount. Finding just a little bit here and there makes a huge difference.
And getting people into the habit of putting a set amount away each month is the key. Priming this habit, getting folks to look past the next 2 weeks, to just consider the adult they are raising, I think that will be hugely affective.
I may not like what the current administration is doing in a lot of things. But for this little one thing, I can at least applaud this little one thing. I think it will really help out a lot of people in more than just the pure cash.
Obviously many people are happy to spend whatever, but with 25 million people you’ll see a wide range of personalities and life situations. Imagine an otherwise identical life without 600 dollars of credit card debt, that’s a worth quite a bit over time and will likely apply to some of these individuals. Perhaps a musical instrument or similar purchase will end up really helping someone kid, you never really know.
People will have a visible example of the power of compounding. It’s just a shame there isn’t more time in the equation so they could see the real magic happen.
Did you know that at typical market rates, someone saving $1000 at age 20 would have $64,000 at age 62?
Even more illustrative, if the same person waited until age 27 to save the same $1000, they would only get 32k. If they started at 34, they’d only get $16k!
The importance of time as the secret ingredient is the best kept secret ( that’s endlessly explained by people like Warren Buffett ). Hopefully these accounts will help the message stick.
> beginning next year, the U.S. Treasury will contribute $1,000 to the Invest America account of every baby born on or after January 1, 2025
hopefully more people/organizations will decide to contribute as well.
But what if 10 or twenty of them want to start a company? Maybe they have some savings or can get parents to chip in or a grant, but they can’t open a store and work it, or start a landscaping business or a software company.