Would You Give Your High School Graduate $60,000?

by Travis Pizel · 6 comments

­­­­My son just started his junior year of high school, and although I have plenty of time to make a decision, I’m already contemplating what I want to give him for a graduation present in a few years. Television shows and movies tend to exaggerate what teens get from their parents for high school graduation. A brand new car might seem like a common gift, but the digital radio alarm clock I received from my parents is likely closer to the norm. Still, what if parents could give their child a Hollywood worthy graduation present? Would you believe me if I said you could give your son or daughter $60,000 for a graduation present? Here’s how I think you can do just that.

But first, let’s talk about me for a second. I am currently contemplating whether I should give my son $1,000 for his graduation present. The gift will come with a couple of restrictions.

  • He doesn’t get it in cash, it must be invested.
  • He cannot touch it until he reaches the age of 65 years old.

Thinking about the restrictions got me thinking – how much would $1,000 turn into through decades of compounding? Bloomberg suggests that long-term investors should expect to earn 6-7% per year on investments once you factor in inflation. For example’s sake, let’s use 6.5%. After 47 years, that $1,000 would be worth $19,294.41.

Not bad, but I wondered to myself how much better the sum could be had I invested $1,000 for my son on the day he was born and then gave the investment to him as a graduation present. After redoing the calculations using the same 6.5% average yearly growth, $1,000 invested on the day he was born would be worth roughly $3,100 on graduation day and grow to just shy of $60,000 by age 65.

Obviously, the numbers used in this example are heavily dependent on the assumed rate of return. This means that the final sum could easily be much higher or much lower. Regardless, parents have the ability to give their children something significant by investing a sum of money very early in their lives. Parents could use this opportunity to give their children three things:

1. The Power Of Investing

By showing them periodically how much the investment is worth and helping them keep it invested smartly, children can easily see the growth of their money over time.

2. The Value Of Saving For Retirement

As the child goes through adolescence and through their college years, they will see how much their fund has grown over the years. They will understand that time is their greatest asset and be more knowledgeable and apt to start investing for their future when they enter the workforce and start their careers.

3. A Nest Egg

While the $1,000 investment will not be even close to enough to live on when they retire, every little bit will help. You may not be around anymore, but that nest egg can be your legacy. Hopefully, it will also prompt them to pass on good financial management skills to their children as well. I missed out on the opportunity to start my son’s investment when he was born, but I’m seriously thinking of giving him a $1,000 investment for a high school graduation present.

Contributing The Sum to a Roth IRA

One wrinkle with all these fantastic sums decades down the line is how taxes will erode the returns. However, I can circumvent Uncle Sam by putting the gift into a Roth IRA in my son’s name. Since you cannot contribute to a Roth IRA unless you have earned income, I will start adding money into his account each year he has a part time job. I also plan to just put the money in the Vanguard Total Stock Market Index Fund ETF (VTI) with dividend reinvestments turned on. That way, the money can grow tax-free and the growth will be fully automated because investing in that ETF is a bet that the economy will continue to grow and that the stock market as a whole will capture that return over time. Set it and forget it. Easy peasy.

You can plant the seed of a fantastic gift by making an investment for your child early in his/her life. Giving them the fund at their high school graduation would give them something to continue to watch grow, as well as financial lessons that will help them become a more financially savvy adult.

That’s a much better present than an alarm clock.

Do you have a young child or one that is getting close to high school graduation? Would you consider giving them an investment as a graduation present?

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{ read the comments below or add one }

  • Nick says:

    When I first saw the headline I was thinking “NO WAY” but then I read the article. Not a bad idea. I can’t remember where I saw this, but a while ago I read a good article about how a father gave his son $3,000 to buy his first car…but there was a catch. He gave his son the money when he was 14 or 15, and said he could just hold on to it in a savings account, spend it on other stuff then not have anything left to buy a car with, or invest it to try to grow it to a larger amount. The article went on to say the son invested in some stocks and lost some right away, but then became very interested in learning about investing and slowly started to make some money back. I think that is a very good teaching example.

  • Money B says:

    The giving part sounds like a good idea but I think the stipulation of not selling it until 65 is a little much. I might put a different age. Hopefully, though, even when it got to that age, the increased value would allow your child to see the benefit of keeping it even longer.

    • Travis @enemyofdebt says:

      Yeah, it might be hard to enforce, too. Maybe an age that they “have to” keep until…and then as suggestion after that. 🙂

  • Ryan G says:


    You’ve inspired me to think about putting money away for my daughter. She is 18 months now, and I would start with a modest investment on her 2nd birthday, and plan to put money away for her each year. Not sure when I would “give” it to her (turn it over) but the plan would be for age 18-30 (no idea what kind of adult my daughter will end up being at this point).

    What sort of investment or fund would you recommend? I’m thinking something like an S&P 500 index fund.

    • David @ MoneyNing.com says:

      A S&P 500 is as good of a choice as any. I personally bought the total stock market index fund for my kids to get more small cap exposure, but who knows what’s better in the long run.

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