Here's how to 60x your family's money

Here’s what Einstein had to say about compounding interest:

I know that everyone reading this newsletter is well-versed in compounding interest and how it is actually the 8th wonder of the world. You get paid on your money, and then you get paid on the money you’ve already been paid for. It’s how you get money working for you.

One of the biggest detractors to this whole compounding money thing is: taxes.

There isn’t a way around it generally that I’m aware of, but there are some things you can do.

1. Keep your money in cash

2. Buy assets that don’t pay interest/dividends/royalties

3. Buy assets that are completely sheltered from taxes

A lot of people go with #1. Some people go with #2. But, I want to show you how we can use #3 for everyone’s benefit.

So last week, I was working with a mother who has gotten a few inheritances, is very good with her money and was looking at the risk side of the equation:

• Insurance to cover her taxes at death

• Short-term risk issues - term insurance

• Critical Illness Insurance - she’d never heard of that and liked the Best Doctors (now Telehealth)

• And, then I brought up a new one: insurance for her children.

She immediately thought it was a great idea and we showed her an option to pay it over 20 years and she said:

Why of course you can.

I showed her a $500,000 life insurance policy paid on her 5 year old daughter in 10 years. She would pay for it in 10 years at a total cost of about $130,000.

But, the question is what is the long-term value? No one knows for sure, but if we just let it grow at the current rates, how much would be in that plan long-term:

By the time this 5-year-old reaches age 105 (if that’s possible, of course), there would be more than $8,000,000 of value, all from a $130,000 investment.

Of course, we are projecting out 100 years here, but this is precisely the value of compound interest and tax-free compound interest to boot.

The purpose of making such an investment is two-fold in my opinion:

1. It gives the child a head start. There is a death benefit they will not have to buy later in life, and there is cash value to access if opportunities arise.

2. It starts a multi-generational process where your children or grandchildren will look at doing the same for their children in future years. They will look to help the next generation. This means all your future generations will have the capital they need to live the lives they want. Family traditions start early.

Some people like the idea. Others don’t.

I view what I do most days as pointing out the risks that people face and showing them the menu of options they have at their disposal to take advantage of it. This is just one of those menu items.

But, I will tell you. The uptake on this menu item is one of the highest I’ve ever seen.

Do what you will with this information, but now you know!

Have a great weekend,

Andrew