Make Your Grandchild Wealthy With $1000:
A Grandparent’s Guide to Making your Grandchild a Millionaire
In the decades ahead, as a result of mortality and inheritance, an estimated $20 trillion will be passed to the next generation.
How can we provide for our grandchildren in the best way?
1. We can provide a way for our grandchildren to grow into controlling money so they know how to benefit from it.
2. We want to avoid taxes for ourselves and them as much as possible.
The Best
Invest early and often. This is the most important advice every grandparent has for the younger generation. Those who are lucky or wise enough to follow this advice turn out to have a happier life by any measure. You may not be able to convince your loved ones of this common sense. Even some of our best schools now understand that this lesson needs to be taught to all, early, just like sex education. Speaking to individuals about their money is the last taboo our society has yet to confront. Unlike sex education, our culture has to make a commitment to make this education universal.
Until it does, you may be able to actually make this happen for your grandchildren as your legacy.
$1,000, invested at birth can be worth about $1,233,274 at age 65. $3,000 at birth can get them about $3,699,823. $5,000 can become about $6,166,372. That is worth about a $1,000,000 in today’s purchasing power.
How cool would it be if you made it possible for them to not have to worry about their retirement? Social Security? You don’t know what the future will bring. You DO know they have a lot of time before retirement. You have the ability to help them get a jump on things. They get a head start on their way to a comfortable life.
If you started them out early, they will have already seen the power of compounding by the time of their first job. Compounding can turn that $1,000 or $5,000 into their lifetime security fund. They can start their Roth IRA or company Roth IRA and know how to earn 12% on their money. Some mutual funds holding stocks have earned 12% historically. At their job, they can contribute $3,000 a year ($120,000) and have another $1million tax-FREE to assure them of long-term care if they need it.
One advisor said: “Obviously, starting early for grandchildren might make all the difference for the next generation. This might become a financial legacy that the present generation can give to the younger generation without leaving assets in a will. But for you and me, the hard fact is that it is TIME and not anything else that we can currently change, that makes compounding work. Look at what a single gift of $1,000 at birth can do for a child.”
Baby's Birth $1000
Age 10 $3,000
age20 $10,893
age 25 $19,788
age 30 $35,950
age 65 $2,347,857
“WOW! That is amazing. Even if they start investing later in life, they can’t make up the time by putting in a little more money, or following advice to ‘buy low, sell high’ or to ‘pick winners and let them ride’?”
Another way to look at this Gift of a Lifetime is that your $5,000 investment before age 5 could allow your grandchild to have what I call a “Wealth Reserve.” They would have a Wealth Reserve of about $50,000 by age 22. That would allow them to start a home, business or go to graduate school if they like. You have the peace of mind of knowing that you have provided the financial foundation for their entire life. If they don’t spend it right away, they can avoid interest expenses when they buy things on time and have enough to insure their retirement needs.
A Wealth Reserve can help your loved one “self-insure” their insurance needs. They can buy insurance and other financial services for less because they have a reserve that covers the high deductibles of insurance policies. They insure for the catastrophic risks like businesses do. They pay less in premiums and fees because they have the reserves to cover the smaller expenses.
In the past, parents and grandparents purchased small insurance policies on their loved ones in the mistaken belief that an insurance policy provides for their financial foundation or guarantee of their future insurability. Neither of these beliefs is true. Sometime in the past these solutions may have been useful to young poor families but not lately.
Child mortality was high when you grew up. Insurers came to collect pennies each week from your parents to pay for a $1,000 or $5,000 death benefit. These small policies provide little benefit when they might be used some 85 years later. I recently cashed mine in for a couple of hundred dollars. Even cremations cost more than the total death benefit today.
Today, almost any child will be insurable by the age they need to have life insurance to protect those who depend on them for financial security. There is no benefit to purchasing a policy at birth to maintain insurability, as some carriers contend. When your grandchild gets married and needs insurance to protect their family, they will need a lot more coverage than the best of the child policies. Also, many employers now provide life insurance, even if your grandchild has a medical condition that would require a higher premium for coverage. The employer’s group rate takes this into account since employees do not obtain full underwriting.
Wouldn’t it be better to provide a Wealth Reserve of about $36,000 at age 18 for your grandchild’s college expense? If they are not interested in college, the $50,000 at age 22 would help them start a business or buy a home or at age 65, provide a pre-paid retirement.
The best part: You don't have to be wealthy to act wealthy. Give $1000 today. We show you how to start.
Find more about The Gift of a Lifetime at
http://www.theinsidersguides.com/gigiofli.html
Wednesday, August 29, 2007
Friday, August 17, 2007
Why "saving" keeps us from becoming wealthy
The savings rate has fallen to almost zero and for good reason. It doesn't work.
One successful investor once said, “Nobody ever accumulated wealth just by saving.”
You build wealth by putting some of your money to work. Yes, you have to send your money out to get a job! And not just any job. You want your money to get a good job making good money. Without a good job, your money will make only enough to cover "working expenses" and inflation. The rate of inflation has been running about 3%. $1 in 1970 is worth 19 cents now.
Where can your money find a good job?
Bank: A bank is where most money works. It earns less than the expense of sending it to work and the cost of inflation which eats 3% to 4% a year. If your money earns 3% and it pays up to 0.8% in income tax, your money earns 2.2%. Inflation of 3% takes everything. You are paying others to employ your money, like sending it to prison!
Real estate rentals: There are many systems that claim they will make you rich as Trump. However, the hard part is finding and maintaining property for a profit. Tenants must be managed. Historically, real estate has returned about 5% over time. It is hard work. It is easier to invest in a real estate investment trust (REIT) and let professionals do it for you with less risk.
Bonds: You loan your money to other people and they pay you back. If your money earns 7%, you have to pay up to 2% in income tax so your money earns 5%. However, inflation of 3% takes away money’s buying power, so you are left with 2%. Tax on the real return of 4% is over 50% of the income. You pay half in tax. Not a very good job.
Stocks: You buy part ownership of many companies. If one does poorly one year, others do well. Your money earns dividends of from 2% to 4% and it also gets a bonus if the companies do well. If you keep expenses low (don’t switch from company to company) your money earns 10% on average. It pays income tax of up to 2% on the dividends and less than 0.5% on the bonus (capital gains). Inflation of 3% leaves your money earning 4.5%. However, this job is not a government job so you might make more or less some years. Over time this job pays the best. Not everyone understands that so this job requires patience like running a business—some quit the job when times are tough.
Over time, your money can make you wealthy. Investing 10% of your family income in a stock mutual fund may earn 10% on average for 10, 20 and 30 years. Investing can allow you to accomplish your financial goals. The miracle of compounding turns your $250 a month each into $1.1 million in 30 years. Check it yourself. You paid $180,000 for that $ 1.1 million. http://www.moneychimp.com/calculator/compound_interest_calculator.htm
To avoid income tax now, use your employer’s 401K or pension plan or make your own with an IRA. Put part of that 10% in a regular account for a home down payment, cars, college funds, vacations—whatever your short-term goals are. Your retirement fund will be full by the time you need it in 30 or 40 years.
If you begin early, your Wealth Reserve can grow large enough to use it as your own bank and help you insure yourself. You spend less on credit and loans. Thus more of your income goes to buying assets that grow by themselves. This is real security: http://www.saferchild.org/power.htm
Your Unbiased Advisor does not sell products. As Editor of The Insiders Guides, I have compiled the "tricks of the trade" of the financial services industry. You can use the Guide you need to buy only what you need and skip the extra commissions and fees that insiders never pay. You buy financial services "wholesale" and use the savings to become wealthy. Our members save up to $3,000 a year.
Our FREE Guide, The Insider’s Guide to Making Your Financial Future, provides the basic information our members use to grow wealth.
One successful investor once said, “Nobody ever accumulated wealth just by saving.”
You build wealth by putting some of your money to work. Yes, you have to send your money out to get a job! And not just any job. You want your money to get a good job making good money. Without a good job, your money will make only enough to cover "working expenses" and inflation. The rate of inflation has been running about 3%. $1 in 1970 is worth 19 cents now.
Where can your money find a good job?
Bank: A bank is where most money works. It earns less than the expense of sending it to work and the cost of inflation which eats 3% to 4% a year. If your money earns 3% and it pays up to 0.8% in income tax, your money earns 2.2%. Inflation of 3% takes everything. You are paying others to employ your money, like sending it to prison!
Real estate rentals: There are many systems that claim they will make you rich as Trump. However, the hard part is finding and maintaining property for a profit. Tenants must be managed. Historically, real estate has returned about 5% over time. It is hard work. It is easier to invest in a real estate investment trust (REIT) and let professionals do it for you with less risk.
Bonds: You loan your money to other people and they pay you back. If your money earns 7%, you have to pay up to 2% in income tax so your money earns 5%. However, inflation of 3% takes away money’s buying power, so you are left with 2%. Tax on the real return of 4% is over 50% of the income. You pay half in tax. Not a very good job.
Stocks: You buy part ownership of many companies. If one does poorly one year, others do well. Your money earns dividends of from 2% to 4% and it also gets a bonus if the companies do well. If you keep expenses low (don’t switch from company to company) your money earns 10% on average. It pays income tax of up to 2% on the dividends and less than 0.5% on the bonus (capital gains). Inflation of 3% leaves your money earning 4.5%. However, this job is not a government job so you might make more or less some years. Over time this job pays the best. Not everyone understands that so this job requires patience like running a business—some quit the job when times are tough.
Over time, your money can make you wealthy. Investing 10% of your family income in a stock mutual fund may earn 10% on average for 10, 20 and 30 years. Investing can allow you to accomplish your financial goals. The miracle of compounding turns your $250 a month each into $1.1 million in 30 years. Check it yourself. You paid $180,000 for that $ 1.1 million. http://www.moneychimp.com/calculator/compound_interest_calculator.htm
To avoid income tax now, use your employer’s 401K or pension plan or make your own with an IRA. Put part of that 10% in a regular account for a home down payment, cars, college funds, vacations—whatever your short-term goals are. Your retirement fund will be full by the time you need it in 30 or 40 years.
If you begin early, your Wealth Reserve can grow large enough to use it as your own bank and help you insure yourself. You spend less on credit and loans. Thus more of your income goes to buying assets that grow by themselves. This is real security: http://www.saferchild.org/power.htm
Your Unbiased Advisor does not sell products. As Editor of The Insiders Guides, I have compiled the "tricks of the trade" of the financial services industry. You can use the Guide you need to buy only what you need and skip the extra commissions and fees that insiders never pay. You buy financial services "wholesale" and use the savings to become wealthy. Our members save up to $3,000 a year.
Our FREE Guide, The Insider’s Guide to Making Your Financial Future, provides the basic information our members use to grow wealth.
Wednesday, August 15, 2007
12 things your agent/broker/banker/money-manager won’t tell you.
1. “We have FEES and COSTS for everything. Most are not necessary.” For instance, your life insurance policy is probably one with a higher premium than necessary. Compare the cost of $200,000 benefit for a 50 year old in good health--$356 versus $481 per year. Also, it does not cost $50 to buy 200 shares of IBM. You can buy them for $0. And why should your broker charge you $160 when your account is inactive? Why are you paying 50 cents to deposit a check? Banks should pay you to deposit checks. Is your 401k money manager really worth 1.54% of your assets each year? And looses money too? Your employer should buy a retirement plan that costs you $0.30% or less with no kickbacks.
2. “We offer products that are best for our firm, not for you. We don’t show you all the fees and commissions and financial kickbacks and perks we earn when we sell you our products. Our products are the “best” available because we sell them. We are the best in the industry because our marketing image says we are.” One pension plan provider charges 2.75% a year for their tax-deferred annuity. It has over 9 years of surrender charges so you can’t transfer your money if you change employers. It charges another $30 a year for ‘recordkeeping.’ Its mutual funds are among the poorest performers. One brokerage firm steered customers into their own funds because they have a higher broker payout. Your agent doesn’t sell SBLI, your broker doesn’t sell Vanguard, your banker does offer really free checking, and your money manager doesn’t price your funds at cost—0.1% or less.
3. “We will discuss your financial needs with half truths.” You are told you need $1,000,000 of life insurance but the policy type that your agent picks is the most expensive in the world. Even if you agree you need $1 million, you pay more for permanent, 30 year guarantee term or “return of premium” term than just term. You want a guaranteed income for the rest of your life but your broker doesn’t mention that the annuity payments loose half their value in 24 years. You want to save for college but your banker doesn’t mention that 529 plans are NOT taxed like the custodial account just opened for your child. You want to save for retirement but your broker put you in ‘hot’ funds.
4. “We don’t tell you about other alternatives. We don’t get paid to tell you there are less expensive alternative ways to solve your problems.” You can buy a FREE checking account from your credit union. The CDs pay more, the checking costs less and the loans are cheaper. You don’t need an ATM on every corner. You can defer taxation on your account earnings by buying and holding stocks or tax-managed funds. You can save on liability insurance by buying only what you need. Wealthy people buy “assets that grow by themselves” so they can self-insure and self-fund their needs. Consumer Reports reviewed 47 policies and concluded that “for most people, long-term-care insurance is too risky and too expensive.”
5. “We don’t explain how you can reach your goals in the least costly way.” Banks offer life insurance to cover your loan because you want to get the loan. They don’t explain that your existing term policy will cover the loan. Also, you can build a much larger retirement nest egg by investing in stock mutual funds costing .07% vs. 1.3%. Compounding magnifies the difference—20% more money over time. When new employees sign up for the retirement plan they are encouraged to pick the ‘safest’ option—treasury bonds. Stocks are more likely to grow in value over the long term.
6. “Our products must be ‘sold not bought. We use half-truths in order to contrive an ‘urgent financial need’ that you can solve only by buying our products.” One firm charged a 91-year-old “client” more than $35,000 for four trades over two years, at approximately $8,800 per trade. The largest annuity seller is accused of misleading policyholders regarding bonus payments promised on annuity products. Life insurance is not the foundation of every financial plan—you are more likely to run out of money than die in the 21st Century.
7. “We believe the hype of our industry: We give good financial advice that you can’t get anywhere else.” There are no classes in our high schools called Financial Health Class. You can’t easily find out the “tricks of the trade” used to sell you the products created to pay high fees to sellers. Young single people don’t need life insurance. They need to invest 10% of their income at an early age to become wealthy. Also if brokerage firms actually followed their own stock selection advice, they would have negative returns. The average return for the top 10 brokerage firms was minus 2.26% from 1997-2001! Most were negative (Investars). 88% of managed mutual funds earn less than the market.
8. “We are experts at figuring out what your “hot buttons” are and using them to get you to buy our products. We exploit the fact that everyone wants to buy the next Google stock or become a millionaire overnight buying and selling real estate or gold. We exploit the fact that seniors fear losing money and want to earn 10% on their money with a completely guaranteed investment.” Finding the next Google is like finding a dime in a football field on the first try. The average equity investor earned a paltry 2.57% annually; compared to inflation of 3.14% and the 12.22% the S & P 500 index earned annually, 1984-2002. You pay for guarantees by earning less and not keeping up with inflation. So even though you don’t lose money, inflation reduces money’s buying power. Putting your money into different investments reduces your chances of losing money and increases your chance of beating inflation.
9. “We don’t sell products from companies that don’t pay a commission—so you never obtain the least-cost product. We only sell products with commissions and fees and kickback incentives and “soft dollar” reimbursements.” When was the last time your broker offered the funds with the highest returns over a 20-year period? Vanguard Primecap--13.6% over 20 years--#1 in large company growth stock funds. Vanguard Health--17.4% over 20 years--#1 in Sector funds. Vanguard Energy--16.4% over 20 years--#2 in Sector funds. Did your agent call to tell you that life insurance rates are dropping so you should apply?
10. “We charge you fees whether we give good service, good rates, good returns, or good benefits.” One money manager charges 1.5% for the same exact fund that charges .07%. With $250,000 invested, you will give up about $700,000 (2,723,138 vs. 2,022,979 over 20 years of compounding at market rates). Only 12% of managers can beat their benchmarks over long periods of time. You don’t get a refund if your manager can’t beat the index. You can’t get a refund if your CD or annuity renews at a lower rate. You can’t get a refund if we mess up your trustee to trustee transfer. We don’t give you a “better” death benefit check for $200,000 when your loved one dies. Many banks hit customers for fees they didn’t know about.
11. “When things go wrong, we treat you like you’re the enemy.” All brokerage firms disallow you to sue for bad service—you must use their arbiter and settle for the decision. One firm has the worst call response service in the industry. Another company pressured outside engineers to prepare reports concluding that damage was caused by water rather than by wind. They just denied all of them in the same geographic area. Another insurer dropped coverage and stopped signing new policies in coastal areas of 9 states. Some long term care insurers aren’t paying claims.
12. “We don’t care if you have been a loyal customer. We buy and sell customer accounts anytime we can make more money from it.” In the last few years, hundreds of customers have had their accounts dumped on others. For instance, John Hancock’s president sold the company to Manulife [Canada], Fireman’s Fund was sold to Allianz [Germany], Household Finance went to HSBC [Hong Kong], and Sage Life went to Old Mutual [S. Africa]. Brown & Co and HarrisDirect went to E*Trade. Golden West Financial went to Wachovia. MBNA and Fleet Bank went to Bank of America. A complete list is available at http://www.theinsidersguides.com/whoowyoacno.html. More consolidation is expected: HSBC, Rydex, Gateway Investment, GAMCO Investors, Julius Baer Investment, UBS AG. Your accounts could be next. You can do it yourself and save.
"Investors should purchase stocks [financial services] like they purchase groceries—not like they purchase perfume…” Benjamin Graham
2. “We offer products that are best for our firm, not for you. We don’t show you all the fees and commissions and financial kickbacks and perks we earn when we sell you our products. Our products are the “best” available because we sell them. We are the best in the industry because our marketing image says we are.” One pension plan provider charges 2.75% a year for their tax-deferred annuity. It has over 9 years of surrender charges so you can’t transfer your money if you change employers. It charges another $30 a year for ‘recordkeeping.’ Its mutual funds are among the poorest performers. One brokerage firm steered customers into their own funds because they have a higher broker payout. Your agent doesn’t sell SBLI, your broker doesn’t sell Vanguard, your banker does offer really free checking, and your money manager doesn’t price your funds at cost—0.1% or less.
3. “We will discuss your financial needs with half truths.” You are told you need $1,000,000 of life insurance but the policy type that your agent picks is the most expensive in the world. Even if you agree you need $1 million, you pay more for permanent, 30 year guarantee term or “return of premium” term than just term. You want a guaranteed income for the rest of your life but your broker doesn’t mention that the annuity payments loose half their value in 24 years. You want to save for college but your banker doesn’t mention that 529 plans are NOT taxed like the custodial account just opened for your child. You want to save for retirement but your broker put you in ‘hot’ funds.
4. “We don’t tell you about other alternatives. We don’t get paid to tell you there are less expensive alternative ways to solve your problems.” You can buy a FREE checking account from your credit union. The CDs pay more, the checking costs less and the loans are cheaper. You don’t need an ATM on every corner. You can defer taxation on your account earnings by buying and holding stocks or tax-managed funds. You can save on liability insurance by buying only what you need. Wealthy people buy “assets that grow by themselves” so they can self-insure and self-fund their needs. Consumer Reports reviewed 47 policies and concluded that “for most people, long-term-care insurance is too risky and too expensive.”
5. “We don’t explain how you can reach your goals in the least costly way.” Banks offer life insurance to cover your loan because you want to get the loan. They don’t explain that your existing term policy will cover the loan. Also, you can build a much larger retirement nest egg by investing in stock mutual funds costing .07% vs. 1.3%. Compounding magnifies the difference—20% more money over time. When new employees sign up for the retirement plan they are encouraged to pick the ‘safest’ option—treasury bonds. Stocks are more likely to grow in value over the long term.
6. “Our products must be ‘sold not bought. We use half-truths in order to contrive an ‘urgent financial need’ that you can solve only by buying our products.” One firm charged a 91-year-old “client” more than $35,000 for four trades over two years, at approximately $8,800 per trade. The largest annuity seller is accused of misleading policyholders regarding bonus payments promised on annuity products. Life insurance is not the foundation of every financial plan—you are more likely to run out of money than die in the 21st Century.
7. “We believe the hype of our industry: We give good financial advice that you can’t get anywhere else.” There are no classes in our high schools called Financial Health Class. You can’t easily find out the “tricks of the trade” used to sell you the products created to pay high fees to sellers. Young single people don’t need life insurance. They need to invest 10% of their income at an early age to become wealthy. Also if brokerage firms actually followed their own stock selection advice, they would have negative returns. The average return for the top 10 brokerage firms was minus 2.26% from 1997-2001! Most were negative (Investars). 88% of managed mutual funds earn less than the market.
8. “We are experts at figuring out what your “hot buttons” are and using them to get you to buy our products. We exploit the fact that everyone wants to buy the next Google stock or become a millionaire overnight buying and selling real estate or gold. We exploit the fact that seniors fear losing money and want to earn 10% on their money with a completely guaranteed investment.” Finding the next Google is like finding a dime in a football field on the first try. The average equity investor earned a paltry 2.57% annually; compared to inflation of 3.14% and the 12.22% the S & P 500 index earned annually, 1984-2002. You pay for guarantees by earning less and not keeping up with inflation. So even though you don’t lose money, inflation reduces money’s buying power. Putting your money into different investments reduces your chances of losing money and increases your chance of beating inflation.
9. “We don’t sell products from companies that don’t pay a commission—so you never obtain the least-cost product. We only sell products with commissions and fees and kickback incentives and “soft dollar” reimbursements.” When was the last time your broker offered the funds with the highest returns over a 20-year period? Vanguard Primecap--13.6% over 20 years--#1 in large company growth stock funds. Vanguard Health--17.4% over 20 years--#1 in Sector funds. Vanguard Energy--16.4% over 20 years--#2 in Sector funds. Did your agent call to tell you that life insurance rates are dropping so you should apply?
10. “We charge you fees whether we give good service, good rates, good returns, or good benefits.” One money manager charges 1.5% for the same exact fund that charges .07%. With $250,000 invested, you will give up about $700,000 (2,723,138 vs. 2,022,979 over 20 years of compounding at market rates). Only 12% of managers can beat their benchmarks over long periods of time. You don’t get a refund if your manager can’t beat the index. You can’t get a refund if your CD or annuity renews at a lower rate. You can’t get a refund if we mess up your trustee to trustee transfer. We don’t give you a “better” death benefit check for $200,000 when your loved one dies. Many banks hit customers for fees they didn’t know about.
11. “When things go wrong, we treat you like you’re the enemy.” All brokerage firms disallow you to sue for bad service—you must use their arbiter and settle for the decision. One firm has the worst call response service in the industry. Another company pressured outside engineers to prepare reports concluding that damage was caused by water rather than by wind. They just denied all of them in the same geographic area. Another insurer dropped coverage and stopped signing new policies in coastal areas of 9 states. Some long term care insurers aren’t paying claims.
12. “We don’t care if you have been a loyal customer. We buy and sell customer accounts anytime we can make more money from it.” In the last few years, hundreds of customers have had their accounts dumped on others. For instance, John Hancock’s president sold the company to Manulife [Canada], Fireman’s Fund was sold to Allianz [Germany], Household Finance went to HSBC [Hong Kong], and Sage Life went to Old Mutual [S. Africa]. Brown & Co and HarrisDirect went to E*Trade. Golden West Financial went to Wachovia. MBNA and Fleet Bank went to Bank of America. A complete list is available at http://www.theinsidersguides.com/whoowyoacno.html. More consolidation is expected: HSBC, Rydex, Gateway Investment, GAMCO Investors, Julius Baer Investment, UBS AG. Your accounts could be next. You can do it yourself and save.
"Investors should purchase stocks [financial services] like they purchase groceries—not like they purchase perfume…” Benjamin Graham
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