Nothing Into Something
Don’t be mad about others getting a head start — instead create that head start for someone else.
For most of my life I’ve been angry. I can admit it.
Angry my parents got divorced. Angry there were drugs involved. Angry they lost custody of me and my brother. Angry we lived disability check to disability check. Angry my dad died of an overdose. Angry.
As it does, anger quickly became jealousy. Jealous my peers had something I didn’t. Whether it be a two parent household, money in the bank, room to think, room to breathe, room to flourish.
All of these things are tremendous advantages — tremendous disadvantages.
According to one study, children in a two parent household are 3x as likely to attain a college degree.
Parents’ education and income levels are incredibly predictive of their offspring’s ability to attain a college degree or a high paying job.
More than anything, what feels so cumbersome and is such a heavy load to carry is the inability to try. Failure means different things for different people. For someone whose parents are wealthy, chasing an art degree, applying to a private college, getting specialized tutoring or ACT prep after a bad score, or waiting a year after college to get a job might seem reasonable.
For someone whose parents cannot provide any financial support (and in some cases are financial drains themselves), there are few risks worth taking. You cannot apply for schools in which financial aid will not cover the bulk of the bill. Flunk out after spending $40k a year? You’ve signed yourself up for a lifetime’s worth of debt. Want to avoid working so you can focus on your studies? Good luck eating and paying for gas.
Back to the jealousy. It’s easy to be on the losing end of this equation and think there’s a zero-sum game being played. It’s easy to look at your peers getting a new car for their Sweet 16, a college education, a new house with a hefty down payment from their parents and think, “these people have everything handed to them. It isn’t fair. I can’t win.”
Then I became a parent. Suddenly it all made sense. The light-switch flipped. We’re buying the expensive formula. We’re buying toys, clothes, shoes, etc. they don’t need just to make them happy. I didn’t see the beach until I was 21 years old. My kids will have their asses in the sand for the third time just after they turn 4 in July.
Our job as parents is to give our kids a better chance than we got. Good or bad. That’s all it is — a chance. We can’t control everything about how our kids mature and blossom. What we can control is the resources they have at their disposal. We can work jobs we don’t want to work — so our kids have the right to choose their career. We can go without a fancy car or upscale house — so we can put more in our kids’ saving accounts. We can push ourselves through college on nights and weekends while working full time — so our kids know one degree is the benchmark instead of an unattainable target.
You can give your kids the head start you didn’t have.
I’m going to wrap this up with a personal finance bent. It’s what I’m passionate about: turning folks into financial successes — especially those of us who weren’t given the tools or the advantages of others.
I talk to people about this in my day job often. Steady action today can make you a millionaire. You don’t have to get lucky. No need to buy a Powerball ticket. No need to pray you’ve got a rich uncle no one has told you about.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” — Albert Einstein
“Money makes money. And the money that money makes, makes money.” — Benjamin Franklin
Without getting too technical, this is a personal blog post and not a financial disclosure, the S&P 500 is a stock market index that tracks the 500 largest companies listed in the United States. Companies move in and out of the S&P yearly, but the index stays the same. Over the last 100 years, through two world wars, two pandemics, multiple recessions, “crazy” presidents from both parties, the S&P has averaged a 10% yearly return (assuming earnings are reinvested.)
Here’s what this means: if you’re 20 years old, you only have to invest $175,000 in the S&P 500 index to reach one million dollars by the time you retire. I know that number comes with major sticker shock — especially for someone with no head start.
The good news: you don’t need a lump sum. You just need to get started as soon as possible. $200 a month, starting at age 20, gets you to the mythical $1M balance at age 65. That number doubles to $443 per month if you wait until you’re 30. At age 40, it’ll take $1,030 a month to reach our goal.
The initial point of this post was not to discuss our own personal finance and retirement goals. The point was about providing a head start for our kids. We do that in a multitude of ways: healthy and respectful parenting, staying with our spouses if possible, raising our own incomes to provide a stable financial environment, the list goes on forever.
By the same measure above, investing small amounts monthly can make a huge difference. And we can start the day our kids are born, supercharging the power of compound interest. $12,500 invested by the time our children turn 18 years old will grow to one million dollars by the time our kids retire at 65. $12,000! A 2017 Ford Fusion (I looked)! Your child won’t have to put another penny in the account and they’ll be millionaires — all because you started putting $60 a month into an index fund when they were born until their 18th birthday. It’s that easy, and it’s that difficult.
We don’t have the power to change the cards we were dealt. But we do have the power to shuffle the deck for our kids.
“It’s good to have people in your life who you don’t want to disappoint.” — Warren Buffett