How To Make Your Child a Millionaire

How To Make Your Child a Millionaire

“I have some money that I would like to invest for my child. How should I invest it?”

This is one of the most popular questions I hear.

The good news is that I get it.

One of my biggest drivers for investing is making my children financially independent long before they are adults.

I want to help my boys create a future where they can do whatever they want in life without worrying about money.

My 8-year-old is passionate about dinosaurs, and the 5-year-old is obsessed with space.

I know… this can change a lot of times before they grow up. But should they wish to dig for bones or study the stars, I want to make sure they can follow those passions.

I also hope they’ll never have to worry about being able to afford retirement. I’m taking care of that for them.

Is it realistic?

Of course it is. But it depends a lot on how much money you invest for them and how good you are at getting a stable return year after year.

You can help them get a good start in life for a lot less money than it will cost them in the future.

I’ll give you some examples.

If you invest $10,000 and receive an average return of 15% a year, it could theoretically become $38 million by the time your child turns 60.

For small children, you have about 20 years before they need to spend money on education abroad or housing.

Theoretically, you can invest $100,000 and turn it into $1.6 million in twenty years, if you get an average return of 15%… and don’t have to pay taxes.

You probably have two objections to this.

First of all, you could argue that 15% is unrealistic, but nonetheless it’s the goal that I myself set for my kids’ investments.

Secondly, taxes are a fact of life, and when you calculate how much the money will turn into, you’ll get a different result if you factor in taxes.

But wait. You have to read on. There are solutions.

This is where you have to be smart about how you invest for your kids. You have to use the tax-efficient ways of investing that are available to you.

The point I’m trying to illustrate with the two examples is the magic of investing for children: there is plenty of time, and compounding can work wonders.

1. Use Tax Efficient Savings Accounts for Children

Almost all countries have some kind of vehicle that allows you to invest for your child without paying taxes on the returns.

In the UK, it’s called a Child Trust Fund or ISA for children.

In the US, you can create education savings accounts such as Coverdell ESAs or 529 plans.

I’m not going to go into too much detail about how much you can contribute or what the specific rules are because it varies from country to country and sometimes from state to state.

The point here is you have to find out how you can invest for your child tax-free, because there will be a way. Most countries have a version of a tax-free account for children.

Rules you should follow when setting it up

Start as early as possible so compounding has time to work.

Set the child trust funds to run as long as possible so compounding can work its wonders while you also avoid it getting paid out while they are teenagers.

2. Use Tax-Efficient Retirement Accounts

Don’t stop at saving for their education.

Set up a retirement account for your child as well (in the US you can set up a Roth IRA for you child and in the UK you can set up an ISA).

Why would you set up a retirement account for your child?

Why wouldn’t you? For very little money, you can secure their retirement because of the wonder of compounding.

Do it as early as possible so compounding can make even a little investment into a lot of money.

3. Invest For The Long Term

There is another way to make your children’s investment more tax-efficient, and that is by investing for the really long term.

Outside the tax-efficient accounts such as the US’s Roth IRAs and the UK’s ISA, you pay taxes on capital gains.

But you only pay taxes when you sell stocks.

So what about investing in companies that you feel sure will still be a good business in 20 or even 60 years?

There are two benefits to investing this way.

Firstly, you avoid paying taxes for all that time if you keep the stock and don’t sell it. Compounding, compounding, compounding.

Secondly, you avoid the worst kind of daredevilish mistakes that many people make.

People make investing mistakes when they think they have found something that will explode in value in the near future. It’s usually too good to be true.

You make better investing decisions when you think very long term.

Overall, there are two ways you can invest. You can pick stocks yourself, or you can invest in an exchange traded fund (ETF).

I am a big proponent of the investing style called value investing. This is a method where you select individual companies whose stock prices have fallen to a level where they are on sale. You can read a lot more about how to do it in my e-book here.

However, choosing individual companies requires some work. You should look at the numbers, go through a checklist, and calculate how much the company is really worth.

If you already know that this would be too much work for you, the passive investing style is your best bet.

Here are the most important investing principles to follow when investing in ETFs:

  • Choose an ETF that follows a stock index (like Dow Jones or S&P 500)
  • Choose an ETF that is cheap in annual costs (should be less than 0.20%)
  • You can look this up on sites like

Learn More About Investing

If you invest in ETFs, you can’t expect the rate of return to be higher than 8% on average a year.

This means that the $10,000 you invest in your child’s retirement account will become less than a million as opposed to 38 million.

If you want to make yourself and your children financially independent, there is no way around it: you must become a good stock picker.

You must learn to follow a checklist, ask some critical questions, and think long-term.

It’s money well spent to invest in courses or a coach who can help you become a better investor.

A good place to begin is with my e-book right here. Make sure you’re on the email list so you can be invited to the free webinar I will be hosting soon.

How to Gift Shares for Christmas

How to Gift Shares for Christmas

Why not give shares for Christmas or birthday presents?

They don’t clutter or take up space, and it’s the type of gift that keeps on giving.

If you select shares in some good companies, they’ll hopefully increase in value over time.

But more importantly than that, you are gifting interest, knowledge, and experience with the stock market.

Hooked? So how do you actually give shares to someone? 

Here are some ways you can do it.  

1. Create the Trading Account and Buy the Stocks for the Person

If it’s your own child or grandchild under 18, it should be pretty easy to set up the trading account and just buy the shares for them. 

Grandparents might need a photocopy of the children’s ID from the parents, but once they have that, they can open a savings and investment account in their own bank and buy shares for the children. 

This is the easiest way to gift shares.

2. Buy the Shares and Transfer Them Electronically

This method is a little more complicated.

You’ll encounter a bit of bureaucracy at the banking level and some high fees, but it’s doable. 

There are options other than old-school transfer today though. There are some apps that make it easier to buy shares as a gift.

You can look up SparkGift, Stockpile, and Public. They even make it possible to buy fractional shares and give them through the apps. 

3. Open an Account and Buy the Stock Together

An alternative is doing it together. You can coach the person through the process of opening a trading account and buying a share. 

If the person is a newbie on the stock market, this is like a double gift: You offer the stock and some basic knowledge about how the stock market works.

Many newbies freeze when they see an online platform because they don’t understand the language. What’s limit? What’s market? They become afraid of doing something wrong, and some people never get past that level. 

You can get them over that hurdle by investing an hour of your time.

4. Give an Investing Course Instead

What about gifting some investing knowledge either along with the stock or instead of giving shares? 

The best investment you can make is investing in your knowledge. The master investor Warren Buffett said something to that effect (the exact quote: “Ultimately, the best investment you can make is in yourself.”).

A stock can fall in price, but knowledge never depreciates in value. After all, it’s knowledge of the stock market that makes you able to make good investment decisions.

Have you considered giving an investing course as a present?

5. Gift the Stock Together with the Physical Product

It might be a little boring to receive an envelope with information about a stock – especially for children.

In that case, what about giving the stock in combination with the product?

Gift Nike shares with a pair of Nike shoes, Apple shares with the new iPad, or Disney shares with an Elsa (Frozen) outfit?

Tell the child, “You own the McGuffin/the gadget/the iPad/the game station, but even better than that, you now own the company that makes it.”

That’ll wake them up. Believe me. I’ve tried it. 

They’ll go, “What?”

Then you can say. “Well. Part of it.”

You’ve got their attention now. Then you give them the envelope. 

If I had bought a share or two for myself and my nieces and nephews for every item they put on their wish list, we would all be very rich by now.

Looking back, I can see now that my teenage nieces and nephew had very good antennas for wonderful investments.

If I had invested in Appple when my nephew was aching to get the first iPod on the market, I would have had a wonderful return (Apple was trading at less than 40 cents a share in 2001). Or if I had invested in Nike when the sneakers were on my niece’s wish list (around 5 USD per share then). Or if I had invested in Amazon when I gave my first Amazon gift card at Christmas in 2001 (around 10 USD per share).

No use crying over spilt milk, but we can do it differently going forward. 

Look at the items on the wish list. Do you spot any companies that are public? Could they be good investments?

How Much Can You Give? 

We usually don’t give taxes much thought when we’re wrapping Christmas and birthday presents, but when you give stocks, you have to be mindful of the tax laws in your local country.

Gifting stocks is like giving money, and the rules are different from country to country. You might incur some taxes, so look up the tax regulations. 

In the US, you can give 15,000 USD without triggering the gift tax (2020).

In the UK, everyone can get a cash or stock gift of 3,000 pounds without triggering taxes (2020). 

Before you get a headache about taxes, just remember, the stock is just part of the gift.

You’re also giving interest and experience in the stock market. 

Don’t forget to download my e-book Free Yourself.  It’ll teach you how to calculate how much a company is worth. You can get it here

Ten Things Rich People Teach Their Kids About Money

Ten Things Rich People Teach Their Kids About Money

You’re shopping for groceries when your kid begs you to buy a toy that he or she has spotted while you were walking around looking for organic oatmeal.

The kid says in a whiny voice: “But all my best friends have it.” Or. “But you NEVER buy me anything!”

What do you say?

Do you sometimes give in, and other times slip in a comment that you can’t afford it?


You are teaching your kids a poverty mindset.

I know you didn’t mean to, but you are teaching them that money is out of their control, better spend what they can quickly since the flow is irregular and moody.

Oh well. We’ve all been there. Me too.

Let’s move on.

Today is the first day of the rest of their childhood. 

Let’s get inspired by those with an abundance mindset. What do rich people teach their kids about money?

1. They Talk About Money

Rich people give money attention. 

They talk about money, and they are not ashamed of it. It’s a welcome and natural aspect of their lives. Something to be addressed. 

They talk with their kids about how much things cost, and they compare it with the cost of other things.

They tell them what they are saving for and how much they look forward to buying it.

They tell them about earning money and investing money. It’s not a taboo. 

2. They Teach Them to Manage Money 

They don’t stop at talking about money. 

They teach them how to manage it.

They give them pocket money that they have the full control over.

When I was a kid, my father gave me pocket money, and I remember the joy of counting the coins in my tin box and looking forward to buying a new tiny thing for my doll house.

I remember when I was older, I looked forward to buying the best roller skates I could get.

I really treasured the toy that I bought because I had waited for it and ignored other tempting things in order to finally be able to buy it.

Give your children pocket money from the time they are big enough to count to ten.

  • Let them play with it.
  • Let them drop a coin and be upset about it (my son recently dropped a coin in an elephant dung at the zoo. He now carries his money in his wallet). 
  • Let them buy something frivolous sometimes and let them regret it. 
  • Let them save money for something they really want.
  • Let them buy something for someone else and feel the joy of generosity.
  • Let them experiment.

When you let go, they learn valuable lessons that only experience can teach them. They learn how to direct and manage their money. 

It’s much better to be a little generous with the pocket money and stop giving them random things that they ask for.

Look at your monthly account statement. How much do you actually spend on miscellaneous things like snacks and toys for your kids?

Give them the ability to control that money instead. The lessons they learn will be very valuable – much more valuable than the pocket money itself.  

3. They Teach Them Abundance  

You must stop saying scary things like “we can’t afford that”, or “you are ruining me”.

Now, you are probably thinking that it’s easy for rich people to avoid saying they can’t afford something, since they have a lot of money.

But honestly, admit it, you’re saying this to your kids even when it’s not true, right? It’s just something to say, like an automatic response. 

Teach them that money is not a limited resource. There is plenty of money – you just need to figure out how to make more of it.

If you think of money as limited, you will never really feel comfortable earning lots of it, because you will feel that you are taking something from someone else. What you get is something someone else is not getting.

But it isn’t like that. When money flows fast, there is more of it. It’s not like a cake that can only be eaten once. Money is unlimited.

Teach your kids that there is plenty for all of us. Tell them that. 

4. They Teach Them to Make Money 

Let them make money. Let them experiment and be creative with it. 

  • Let them sell used toys on a flea market.
  • Let them collect bottles.
  • Let them walk the neighbor’s dog for pay.
  • Let them get a bit of interest on the money they’ve saved. Let them get the dividends on stocks that have been paid out, and give it to them in cash.

Earning money will give them valuable lessons for life.

If they ever need money in the future, their brain will be conditioned to think of solutions – instead of being conditioned to ask their parents for money to fix the problem. 

5. They Teach Them About Assets and Liabilities

They teach them that some belongings cost money.

They teach them how some belongings make them money.

Let your kids get a taste of it from an early age.

A liability might be something small like having to pay for pet food. They get used to considering recurring costs and taking responsibility.

An asset could be getting interest on money saved in their piggy bank. It doesn’t have to be big. It’s a question of getting used to the concept of money flows created by assets and liabilities.  

6. They Teach Them About Patience and Postponing Needs

You’ve probably heard of the marshmallow study that had kids sitting in a room with a marshmallow in front of them, and testing whether they could postpone eating it. 

They were told they would get a second one if the marshmallow was still in front of them when the grown-up returned.

Follow-up studies showed that the kids who managed to distract themselves and control the impulse to eat the fluffy sweet were more successful later in life.

The conclusion was that postponing your needs and controlling your urges are important skills to master.

How do you teach that? Well, you are well under way in letting them manage their own money. They will learn to let some things go in order to get what they really want. 

There might be other exercises that you can think of in your everyday life.

7. They Teach Them to Be Consistent

Success is the result of consistent action. 

I really got that the day my English teacher said that if I learned one new word every day, my vocabulary would increase with 365 new words in a year. Two new words a day would be 730 in a year. One or two new words a day seemed like such a little effort, and the result after a year seemed enormous. I decided to learn five new words a day. I lived in Denmark at the time and wanted to move to Canada where my older sister lived.

What is your child interested in? How many dinosaurs will he know if he learns about a new one every day? How many words can she read if she learns a new one every day?

8. They Teach Them to Take Care of Themselves  

We all know some adults who approach life with the attitude of a sulking child.

You know who I mean.

The person who feels like life or certain people around them owe them something.  The person who is still expecting to miraculously be saved by a shining knight. The person who can still talk at length about how their sister got more from their parents than they did.

These people. Those who feel it’s someone else’s fault that they did not get what they want.

Rich people make their children aware that no one owes them anything and no one is going to save them. If they want something, they have to make it happen. 

9. They Teach Them to Solve Problems     

All self-made billionaires solve problems.

If you want to get rich, you have to either solve a big problem or solve a problem for a lot of people. 

Train your children to think in terms of problems that have to be solved, and they will never go hungry. It’ll make your children great entrepreneurs or leaders. 

10. Teach Them the Basics of Social Rules

One of Warren Buffett’s favorite books is Dale Carnegie’s How to Win Friends and Influence People.

It has taught Buffett to be diplomatic, and Dale Carnegie’s strategies have probably helped him create his fortune.

But that is not the most important thing about following some smart social rules.

Social rules are basic for a happy life. Teach your children the principles of the book, and they’ll do better both in their careers and their relationships. I’m going through the principles these days on the Instagram account Moneyandfreedomwithstocks

As Warren Buffett puts it: “If the people you want to love you actually do love you, you are a success.” 

What good is all the money going to do it if you have no one to share it with?

Don’t forget to read the e-book that will set you free. You can get it here.

The 7 Money Lessons Most People Learn too Late in Life

The 7 Money Lessons Most People Learn too Late in Life

I have spent most of my life studying, dealing with and writing about money, but my kids’ experiences are limited to playing shop keepers in a sandpit.

Their financial future is already unfolding as I am investing for them, but one day they will have to manage their own money.

When the time comes, I will teach them the most important money lessons.

Here is what I’m going to tell them. Maybe you can learn a thing or two from it too. 

1. The True Value of Money is Freedom  

A lot of people associate wealth with luxury cars, designer handbags, yachts, jets, worldwide travels and diamonds, but the truth is that the real dividend of money is time and freedom. 

The freedom to choose what to do with your time and your life.

Let’s face it: Time is a very precious and scarce resource. You only have so much of it. Most other things you can get more of. But not time.  

Money cannot buy you happiness, but it can ensure that you have a better shot at living a rich and satisfying life as you get to choose who to work for, where to work and when to work. You get to decide who to spend time with, as you are not necessarily forced to be away from your family and loved ones for a day job.

2. Invest Early and Avoid Debt 

Invest as early as you possibly can to make the best use of compound interest.

What is compound interest? According to Albert Einstein it’s the eighth wonder of the world. 

When you invest, your money makes money for you. Later on the new money that you made makes money for you too. That creates exponential growth which on a chart looks like a hockey stick: first a flat development but then later on a steep curve. It takes years for the steep curve to kick in so you have to begin now. 

It works the other way around as well: If you have debt, you have to pay interest. If you are not paying off your debt, you’ll have to pay interest on the interest too. Hence the name compound interest.

Avoid debt like the plague. 

3. Successful Investing Requires Patience and Consistency 

A lot of people think you have to be exceptionally intelligent or lucky to beat the market. You don’t.

Money success requires patience and consistency.

It requires that you invest steadily, keep at it and that you breathe when the market makes wild swings. 

Charlie Munger (Warren Buffett’s partner) says:

“You don’t have to be brilliant. Only a little bit wiser than the other guys, on average, for a long time.” 

Wiser is not the same as intelligent or brilliant. I know plenty of highly intelligent people who suck at investing.

Wise is about staying calm and rational.

By the way, in my view, consistency is the key to success with almost anything. If you want to be good at something then keep working at it everyday. One step at the time – and no panic if something unusual happens.   

4. Spend Less Than You Earn  

This is the most important money principle of them all: Always use less money than you earn.

If you always use less money than you earn and invest the difference, you will do alright financially in life. 

A lot of people fall into the trap of spending more money than they get each month.

I had a friend who spent her entire paycheck and then some on random designer clothes and beauty stuff. By the end of the month, she had to borrow money to survive.

I asked her about it and she said: “Well, my account fills up next month anyway.”

Living like that is like digging a hole underneath you. The hole gets deeper every month, and it gets gradually harder to get out of it. 

5. Your Happiness Can Be Measured in Relationships – not Money 

Money is just a means to an end. It’s not the goal in itself.

Be mindful of your relationships because they are the source to happiness – not money.

Warren Buffett says: “Success is when the people you want to have love you actually do love you.”

So how do you build great relationships?

I’m no expert on that matter, but Dale Carnegie is, and Warren Buffett is a big Dale Carnegie fan. 

You are on the right track if you are friendly, smile, use people’s names often, show interest in the issues that matter to them, praise them specifically and in front of other people and agree with what they say.

You can learn more about all that in Dale Carnegie’s book How to Win Friends and Influence People.

6. You Are Your Biggest Asset 

Never stop investing in yourself, your knowledge and skills. You are your biggest asset (not your stocks and shares). 

You are the one who earns the money and picks the stocks to invest in.

What does it mean to invest in yourself? It means getting educated, attending courses, reading books, blogs, newspapers and listening to podcasts.  

The value investor Monish Pabrai says: “In investing, all knowledge is cumulative.”

You never know when you can use the knowledge you acquire today to pick a good investment.

Just keep learning, keep reading, keep studying.

You can upgrade your knowledge today with my free e-book on investing here.

7. Be Careful With Seeking Advice From Others

You say that you become the average of the five people you spent the most time with.

I think you become the average of the people who you choose to be inspired by and whose advice you choose to seek (there is an element of will here).

So make sure only to take people seriously if they deserve it. Look at what they have accomplished themselves.

Just because someone wears a suit and a tie and is called an expert by others, it doesn’t mean that you should do as they say. Be very selective about the people you listen to and copy. 

Remember, market movements are the sum of many people’s opinions. It’s a flock mentality reaction.

If you chose to sell stocks because they are falling, you are taking advice from a herd. It’s like throwing tomatoes and rotten eggs at someone because you see other people throwing them – without checking who is on the podium. 

Do you want to learn more about money management? Read my book on investing here.