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: The best gift of all? A financial legacy for a child

Last month, my wife and I welcomed a new baby granddaughter into our lives and made a $10,000 gift that we hope will change her future.

We described this gift and our intentions for it in this article. It boils down to this: We hope the money will someday let her retire earlier (or perhaps better), as she sees fit.

Read: This one great idea can make everyone better with money, older Americans say

We’ll be long gone before she is anywhere near retirement age, and the success of our plan hinges on her faith, belief, and patience. So we’re writing a letter to be given to her when she becomes an adult, or when her mother senses it’s the right time.

We think other grandparents — or parents — who are considering a long-term gift (in whatever amount) might be interested in what we’re writing.

It will be along these lines:

As we write this letter, we know you only as a tiny baby. Your life and your future seem to be filled with endless opportunities, many of which we cannot even imagine.

Even before you were born, we began thinking about the best possible gift we could give you. Our answer: We want to give you a future filled with possibilities that you might not have otherwise.

To do that, we have established a pool of money that will someday belong to you, money we hope will enhance the later years of your life.

If your adult working years are anything like ours, you won’t have time to do everything you would like to do. That’s the case for almost everyone.

Yet someday it’s likely that you will want to cut back on your career and pursue some of your dreams. This phase of life is commonly known as “retirement.” We hope this gift will “buy” you an enhanced retirement.

Read: Save like mad for five years — then retire with millions

When we were your age, we embarked on careers that were satisfying in many ways. We overcame many challenges, worked with and for many interesting people, and along the way accomplished some things to be proud of.

But we didn’t have the time or freedom to do everything we wanted to do.

We had always saved some of the money we made, and about 11 years before you were born, we found ourselves both retired and fortunate enough to have more financial resources than we needed.

Thus began our retirement, a very exciting new chapter in our lives.

One of the best things we were finally able to do — and which we can still do — is travel the world. We’ve visited New Zealand, France, England, Germany, Italy, Africa, Mexico, and Japan, as well as many places in the United States and Canada.

Perhaps the most special thing we can do now is find ways to be generous, to use our resources to help other people.

Every year, we give 30% of our retirement income to charitable organizations that are making a difference in the world in ways that we really care about. The level of satisfaction we get from this is much higher than we would have expected when we were your age and focused on building our careers and meeting our own needs.

When you reach the retirement stage of your life, we want our gift to help you pursue your own desires and passions, whatever they may be.

However, this can happen only with your help. Specifically, you will need to let the underlying investments grow throughout your lifetime. That will require three things. The first two you cannot control. But the third will be in your control.

First, millions of people working at tens of thousands of companies will need to produce goods and services that can be sold at a profit. (Maybe you will be one of those people.) And the managers of those companies will need to share those profits with the owners of the companies. (You WILL be one of those owners.)

Second, millions of investors will need to have enough confidence in the future to buy and sell the stocks of these companies, creating a market for them and establishing a value (which we expect will grow over time) for your own portfolio.

Third, you will need to hang on to your investments through thick and thin, through good times and bad. You will need to maintain faith in the future. You will need to trust the investment choices that we have made for you.

Read: 5 lessons for a bear market

You (and your parents) will need to find the financial resources to continue your education after public school. And you will need to provide for your financial needs between your schooling and retirement.

If our gift and this plan are as successful as we hope, someday far in the future you will be able to make similar gifts — and write similar letters — to your own grandchildren.

The future is unknown to us now, as it will be to you when you read this letter. But we can make one important promise about the future: No matter what, you will always have all our love and our best wishes for whatever life you determine is the one that you most want to live.


Etc etc.

P.S.: Your mother knows the details of the investments that we believe will be the most likely to provide our intended outcome, and the reasons for them. She will explain them to you when the time is right.

We hope you will gradually learn the thinking behind these choices and that this knowledge will help guide the choices you make with the money you set aside from your own earnings.

That’s the end of our current draft of this letter. For readers who want to know more about the ways to make this sort of gift, I have recorded a video as well as a separate podcast: “How to create a financial legacy for a child.”

Richard Buck contributed to this article.

Paul Merriman and Richard Buck are the authors of We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement. Get your free copy.

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