So, lets get this out there first of all, I’m a convert to the LDS faith and never went on a mission. However, I have the in laws who went on missions, and claim it was the best two years of their lives! I have heard this over and over again from others at church, and I can see the appeal of the idea of an 18 year old traveling the world on their own having only one thing to do, share the gospel.
For all the non LDS people, let me explain what I’m talking about. LDS, or The Church of Jesus Christ of Latter Day Saints, encourages young men ages 18-19 go to on a two year full time mission to spread the gospel of Jesus Christ. Young women age 19 are eligible for 18 month missions, and then when you get older, into retirement age usually, you can go on missions for different reasons, for different amounts of time. The senior missions, for older members, are more varied and less structured. There are service missions, medical missions, informational or tourist missions at church history sites, and there are home missions where you can do them at your own home in your own communities. You can find out more information about missions at LDS.org.
*If you aren’t an LDS member you will want to keep reading because this is an article about how to give your infant child a big cash reward for being born!
I was driving home from work the other day and I was ponder how well my mutual funds where doing in our current bull market, and how I made over $1,000 in one day doing nothing. I started to wonder how my accounts would have looked if I started out in a bull market and made all this at the beginning and watching compound interest just got o town for 30 years. (My accounts struggled in 2008 a year after getting my act together) Then the epiphany happened while driving. I thought what if I had $2,000 at the time my child was born from family and friends, instead of all those cute outfits and stupid gadgets, and I put it in a nice Vanguard growth mutual fund. Then gave it to my child at age 18 as their gift. Below is what I drew up for the $2,000 at 12% return for 18 years.
As you can see at 12% you would end up with $13,727.76 being made over the 18 years with the initial $2,000 investment and adding nothing else. An LDS mission is on average $400 a month for 2 years at $9,600. So you have the mission fund and some spending money for your newborn, now 18 year old. Even if you are not LDS, how nice would it be to send you child off into the world at 18 with a nice emergency fund, or down payment on a small starter home. If they decided to never spend the money, and keep it in the account until they are 60; for 60 years of growth at 12% interest compounded annually, then you child will have $1,795,193.87!! Remember this is all with the $2,000 at your child’s birth, and never adding any more money to the account ever!
So lets look at a worse case and say you only make 8%on average for the first 18 years. Then your child would have $7,992.04 in their mission fund, and only $202,514.13 when they are 60. Is anyone complaining about all the free money?! If you come up short then have your teenager get a job and make $2,000 busing tables or serving drinks at Sonic for their mission, and hopefully your money savvy adult child saves in a Roth IRA, 401k, or other retirement accounts so the $202,514.13 is just icing on the cake for a better retirement life later.
So, the lesson from this scenario is simple, save early for the best compound interest results. Also, you can change your child’s life with this $2,000 at their birth. So, as you plan to have your baby, question that diaper genie, all those 0 to 3 months clothes, and ask for cash to start your child’s life off right. Give them the gift of the mission, give them the gift of learning about compound interest, give them the gift of a financial future, and give them the gift of passing this plan down to future generations.