Hey friends,

I posted a video on Tiktok about how to make your kids seriously rich. It was only 30 seconds and there were enough comments to deserve a longer Journal entry.

But first, this week I was reminded of how important networking is.

A former university classmate who I haven’t seen in person for 16+ years responded to last weeks email and we caught up on a zoom call. He’s married, two young kids, lot’s of experience in the real estate development world and is the director of investments for a 100 year old family office of UK heritage. We shot the breeze on commercial real estate opportunities as they look to expand their investment portfolio with new partners. I have sent him some information on what we do at Narland as a result.

Another interesting interaction I had came from instagram DMs. I posted something about Lululemon and Nike - both household consumer brand names known worldwide - but their stocks are both down around 75% (another newsletter in the future will discuss this topic and the vagaries of trying to pick individual stocks). Anyway, a gentleman that I know of through squash but also his immense success as an entrepreneur in the Vancouver community (I’ll reserve his name and the associated companies he’s built; I estimate his networth around $300,000,000), decides to send me a direct message based on the post. We got to chatting about investing, entrepreneurship, and that he appreciates the simply finance content I put out for people. I have nothing to offer him other than being grateful he supports the content.

Apart from really loving to write and help others with this Journal (and social channels), it is not lost on me how many people can be reached with a weekly email and maybe a couple videos. A little bit of effort in this regard goes a long way to opening new doors, and keeping old ones open, too.

You never know when you might walk through one of them.

Onto business.

Eddie

How to make your kid(s) seriously rich:

All it takes is $5,000 upfront and $100 bucks a month, a 10% average return, and time. Use a future value calculator to prove it to yourself.

The main question I get asked is what account to use. Which I will answer. But first, I thought I’d provide a screen shot of one for fun:

Hope you had a chuckle at that comment 🙂.

Honestly, the account you use should be the least of your worries.

Much less important is the account type than the basic principle of investing the $5,000 on birth-day 0 and most critically, investing $100/month for 780 consecutive months at a market average interest rate of 10%.

You as a parent need to pledge to yourself and act on the committment to get the gravy train out of the station.

Here’s what the first 18 years look like:

You contribute a total of $26,600 and they have $90,000 because of the growth.

It is then incumbent on you (or SmartMoneyKids) to teach your kids the importance of staying on track so that they commit for themselves and their futures.

This is what the second 47 years looks like:

In total, you and your kid contribute $83,000 over 65 years and they get $11 million dollars. It seems crazy and hard to believe. But the math checks out. Compound interest is serious.

Having said all that. Give the people what they want - what account should be used?

Well, in Canada you aren’t allowed to open an investing account until age 18 (don’t get me started 😡).

You have a few options:

The magic is less about the account and more about the consistency and the time you allow your ongoing contributions to compound.

Order of operations in my mind is:

1. Max personal husband and wife TFSAs
2. Max fund RESP for kids
3. Max invest non reg accounts/RRSPs

When the kids turn 18 you can figure out how to give them money if that’s what you want to do. Gifting money is tax free in Canada. If you give them proceeds from your TFSA, no capital gain tax to worry about. If you give them money from your non-reg, yes you will have some capital gains to pay when they’re 18 to then transfer the money to them (again the actual “transfer of cash” to their hands is tax free).

Also, the classic pushback I get is summed up in these two comments:

Ok I get it. Everyone has their own situation to figure out. If you can’t by the birthday 0, set a target for birthday 1 or 2 at least. $5,000 is $13 day for one year, or $6/day over two years - you CAN do it! Key is not to let it fall by the wayside and 12 years later wish you started earlier. While people say they are struggling and mostly blame outwardly (this economy?!), it’s hard for people to look inward and take a serious consideration of what they are spending on. Audit your monthly bills and I guarantEE there’s a $100 in discretionary, if not downright useless spending, that can be redirected to this endeavour.

Yes the big mac has gotten more expensive. It’s gone up 13.3x in 60 years according to Kim. But the S&P500 has gone up 300x. So, Kim, your comparison, ahem, sucks. Rosa had an even better follow up: “in 65 years the zero you invest will still be zero.”

Finally, maybe you’re 55 and you feel like you’ve started too late. It’s never too late.

If you got kids, or nieces and nephews, or grandkids, you now have a meaningful time horizon for your family to get rich.

Sent an offer in this week to acquire a grocery shadow anchored retail centre. High quality tenants in a busy corridor with opportunity to add value. As always, it all comes down to price. What we think it’s worth vs what the Vendor demands. Getting the vendors broker to educate their client about how “the market” is valuing their property is critical. We shall see.

“A society grows great when old men plant trees in whose shade they shall never sit”

—proverb

If you’re a parent, what’s your plan? I’m genuinely curious. Respond with some thoughts and I’ll share in the next issue!

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