this post was submitted on 19 Feb 2025
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It’s certainly possible to earn yourself into being a millionaire without fraud. You need more than a million dollars just to retire in the US.
Billionaires are another story entirely.
It’s certainly possible to become a millionaire without committing any fraud - you just have to start as a billionaire first.
If you are given/get/earn $51,000 and you invest that at a 7% return when you are 21 and never save a single extra penny, at age 65 you will have $1,001,051.44.
I'm not suggesting everyone can come up with $51k at 21. This is just illustrating that the path to being a millionaire is can be more about how early you start saving rather that how much. If you start saving much later, you have to save much MUCH more to reach $1m.
More realistic example for most:
At age 18 start investing 200 per month at 8% return. At age 63 you have over million dollars. If your parents invested the 200/month for you for the first 18 years you were alive, you'll be a millionaire at age 45.
I've always thought that we should offer some kind of a credit to parents to invest in a retirement account for their kids. Nothing huge, but something that will get six decades of compound interest. Not only would that help all future generations to retire in an economically sustainable way, but it should also be a slow and steady boost to the economy.
Unfortunately, that would be unlikely to happen in the best of times. The people who would benefit most won't be voters for years, and won't actually reap the benefits until the politicians passing the law are all long dead. Given the dystopian nightmare timeline we're in now, I'd say the odds of a program like that being created are slightly lower than the odds of us trying to fund social security by invading Ireland to find their leprechaun gold.
Parents could do savings, but in the USA a "retirement account" is usally defined by an IRA or 401k. For an IRA, there's actually no age restriction, but the person must have earned income. I suppose this could even be a 12 year old babysitting or lawn mowing, but the 12 year old would have to file a tax return (but they wouldn't be charged any tax for their low income).
Starting in 2024, you could rollover unused funds in 529 accounts (college savings accounts) into IRAs (retirement accounts) without any penalty. So I suppose this would check the box with what you're asking for. Note: limit on this is up to $35k.
Well beside the 529 rollover to IRA, there was a great problem called myRA which was a baby Roth IRA with no fees, no minimum deposit to open it, a guaranteed return (backed by the US Gov), and contributions could be as little as $5.
"The myRA was a "new type of saving bond that we can set up without legislation"[1] guaranteed to have a decent return, by holding an "add on" Treasury security in a Roth IRA, with contributions after taxes and lifetime growth to be tax free. The maximum annual contribution is $5,500, including any Roth and Traditional IRA contributions.[17] When a myRA account reaches either $15,000 in value or 30 years of age (whichever comes first), it will roll into a private-sector retirement account. The initial investment can be as low as $25, and one can make periodic investments for as little as $5 every time one gets paid.[18] "
source
It was closed down in 2018 because so few Americans used it. source
I was getting excited up until this point. It’s too late for my kids now but I wish we knew about this
Edit: oh, it was only there for a few years, and we were having a medical crisis at the time. We wouldn’t have been paying attention
The difference between my proposed policy and the ones you are discussing is that I would suggest that there should be some amount of funding for it coming from the government. I wouldn't object to parents being able to invest some additional money into the account, but I don't think it solves the problem if parents are the only ones contributing. Kids already put a strain on finances, and most people aren't going to invest money they need today in an account that won't be touched for more than half a century. Lower income families in particular would get the most benefit from such a program and would be the least likely to use it unless it was funded by the government.
I wouldn't even want to make this an optional program, I'd say the account should be created automatically and parents can gain access in order add money of their own or possibly to adjust the investments among a defined set of options. When a kid comes of age they would be able to claim the account, and they should be able to contribute to it with a withholding from their paycheck.
How many banks in the US offer that rate?
If you're looking at parking your money in a bank for any appreciable return, you're going to be disappointed. 7% is a moderately conservative expected return rate especially given a 45 year time horizon. The boring S&P 500 has a historical rate of return of 9% to 11%.
I’m not, I’m British, I think the highest bank interest rate here available to anyone is 4, maybe just under 5. I was just after comparisons. Thank you though.
Bank interest rates will never be a path to wealth. At most they help your money stay even with inflation, but usually not even that. This is a reliable low risk way to park money that might npbe needed on short notice, such as an emergency fund
investments might make you wealthy, over a very long time, assuming prudent choices. However usually risk is inversely proportional to reward: you can also lose a lot very fast, or you might only make middlemen wealthy. Investing is a huge topic area with all sorts of sometimes conflicting advice.
However looking historically there has never been a, was it decade, where the SP500 stock index lost money. The most reliable way for most people to raise their status might be:
Your 4% and 5% across the pond are about the same here stateside for what are considered "high yield" savings accounts (government protected) or money market accounts (private-based protection). These rates are largely tied to US Treasury Bill rates which echo what you're seeing on your side too.