Mississippi Money: What Returns to Expect When You’re Expecting
By Ryder Taff
Having a child is a long-term investment. You’re in for at least 18 years before they move out of the house, and if your child is anything like me, they’ll come back after 21 years and complain about what you have done with their room before sleeping there for a few more years. While it would be impractical to have every day, or even every month or year planned out before your child is born, you probably have a sense of the big picture. You know what values you will pass on to your child and you have hopes of how they will turn out as they grow.
Watching an investment account grow is also a long-term process. While we don’t know what the market will do on any given day, month or year, we do have expectations about how it will perform over the long term. While any given year might have returns exceeding 100% or losses over 50%, over 18 years, the market has always had positive returns.
What do these returns mean? When your goals are in the distant future, college expenses or retirement, for example, time is on your side. On average, a dollar invested in the stock market when your child is born will turn into $4.87 for her college education. If you’re just starting your career, the first dollar you set aside will be worth $21.76 for your slightly early retirement in 35 years!
Large financial goals take disciplined saving, careful planning and prudent investing. Low cost investment vehicles like ETFs allow anyone with an investment account to be exposed to the risk and return of the S&P 500. While you can’t predict the returns for any given year, you can still expect that investing in the stock market will provide some of the best returns on your money over time.
Don’t wait until your child is off to college to start thinking about your own financial goals. Having time on your side makes reaching goals easier. A little bit of discipline can keep your financial plan working hard for you in the background. The years will fly by. Spend time raising your children, and your money will get to work for you.