Do You Want Your Children/Grandchildren to be Millionaires?
                                                                               
                                                                                                                By Richard F. Gillette

Of course you do, providing the money will not preclude health and happiness!  Then read on for here may be a painless path to their financial independence.

The best way for them to earn more is through education. The US Census Bureau shows that college degree holders and occupational certificate holders earn a lot more than high school graduates do. However, more earnings in it self does not guarantee an accumulation of wealth! Invested savings are required to accumulate wealth, and the earlier you start the greater the accumulation. We can tell this to our children, but in most cases, the pressures of life in their younger adult years will overcome their ability to save.

If you start when they are teenagers, there is a way that you can provide the basis for a savings plan that most likely will accumulate to a million dollars (tax free dollars) as they reach retirement age.

When they turn 16, have them open a Roth IRA with a $4,000.00 deposit. Select a broad based mutual fund or an S&P 500/1000-indexed fund or similar investment. On their 17th, 18th and 19th birthday place an additional $4,000.00 dollars in the Roth IRA.

You will have to follow all IRS rules, and as such the youngster will have to have at least $4,000.00 of earned income. Almost all part time workers over 16 years old will meet this earned income requirement. They can make the IRA contribution from any source of funds, including savings and gifts. Hence parents, grandparents or anyone can make all or part of the IRA contribution. The IRS does require that when the contribution is not made by the child, it and any other gifts given to that child, by one giver, total $11,000.00 or less per year to be tax free.

The Roth IRA will have a value of close to one million dollars when they are in their 60's. The exact amount depends upon the earnings rate. One example being; at a 9% earnings rate, it will grow to $1,050,313 at age 66. If the earnings rate is lower, the million will be achieved later. If additional money is added to the Roth IRA in future years, the million will be achieved sooner. The Roth IRA also is free from federal income tax!

That is fine, but when they are teenagers is the exact time we have to use all extra funds to pay for the child's college!  Where does someone get $4,000.00 extra each year?

One way to obtain it, may be by them attending a community college for their first two years. In most cases, the tuition and room and board savings will exceed the $16,000.00 you put into the Roth IRA.

Will their education and earnings suffer by making this choice?

Check out your community college. All Illinois community colleges and most others have matriculation agreements with outstanding 4-year colleges that guarantee that community college courses will transfer to the 4-year college. The community college may also provide you with data on how their students do at many great senior colleges. In many cases community college students finish their 4-year college with grades equal to the grades of those who went to the senior college all 4 years. As a rule, community colleges will have many professors for teachers and smaller classes. At community colleges professors teach full time. At senior colleges professors research and graduate students teach a large number of the first two years of courses. In addition, most students at community colleges will have an easier access to tutoring and extra help if needed. This coupled with home living and parental supervision, versus a dorm, usually will provide a better educational environment.

When they complete their first two years and then transfer to a senior college/university, the 4-year degree they receive will be the same as if they attended the senior college/university for all 4 years. Hence, campus recruiting and earnings potential are not affected when compared to some one attending the same senior college/university for all four years.
---
© 2000, 2002 & 2006 RF gillette inc.  Nonprofit reproduction approved with author's credit and copyright.