Inheritance; a feature you hear about from movies but seems financially out of reach for anyone but multi-millionaires right? Wrong.

Today, we are going to show you the principles of how you can take even the smallest of Christmas bonuses and transform that into an inheritance.

Your child is born, now what? Inheritance – that’s what. You don’t need to be at the millionaire status from now to set up each and every one of your children with financial options when they come of age. You know we’re about creating wealth for Trinidadians and Tobagonians here at Firstline, and with no further ado, let’s begin.

So, can you convert your Christmas bonus into a inheritance? Short answer- Why not?!

Forward planning and creativity are the winning principles to wealth creation, and you seem to be right on track with your thinking.

The following are three fundamental steps that will help you achieve that inheritance:

1. 1. Always pay yourself. (savings)
   2. Invest the accumulated savings and make additional contributions from future bonuses
   3. Monitor the performance of your investment against investment objective

You see, paying yourself is an incredibly important habit to have when attaining your financial goals. The percentage of your bonus retained can be used to start that inheritance which allows your money to begin working for you. 

For our example, let’s imagine that you have just had your first child. December was remarkably good to you (healthy baby and family), and as you stare at your beautiful baby you realise your own mortality. You want to be the responsible parent from now, so while you have the thought, you decide to put $50,000 aside for good use. Your plan is on your child’s 20th birthday, they receive $250,000 from you. House deposit, business creation, whatever they want to use it for – no matter what, whether alive or not, your child will receive $250,000. That’s your goal.

So, how do you make that happen without having to make all of that extra money – whilst still wanting to live a comfortable life yourself and not be constantly moving your personal funds into your child’s future fund?

The inheritance.

Now let’s look at the numbers below. It will illustrate how a simple investment can grow exponentially over time (aka,  creating wealth for you)

So, how can you transform 50k into 250k, without your own personal blood, sweat, tears, and ultimate sacrifice over 20 years? Compound Interest. 

Remember, for this example, we’re not focusing on “waiting 20 years for $250,000”. This is a fund for your child, and you don’t want them to have that money until they’re a bit older and can manage it themselves legally – so the 20 years is your investment time. Truly, the thing to focus on in this example is the annual contributions. 

Above, in each example, the goal is the same – make $250,000 in 20 years. They all start with the same amount ($50k), but take a look at how much money you have to put into your fund to make that goal.

See how the numbers are dropping with the increasing interest rate? That’s the obvious bit right. Here’s the not so obvious bit – focus on the third scenario in more detail. 

That person had to pay $2,298.97 a YEAR to make the 250k goal for their children. That is $191.58 every month, and your child is on track to receive $250k when they come of age.

Not just that, but the total contributions that person added to the 50k inheritance over the 20-year period would end up being only $95,979.46, yet the final value of the investment is $250,000. Yup, 2.6-times what they started off with. 

Investing all the accumulated savings and making additional contributions from future bonuses will only make the final figure larger, faster. The beauty of compound interest.

Exciting right? Yes! Wealth building! You can do this! You’re excited! But… how do you make sure that your investment doesn’t falter? How do you know what to watch, and when to ensure as best as you can, that the returns only increase? Simple, by using actual investment professionals. You can attempt to DIY this sure, but this is your child’s fund. Are you planning to DIY it for 20 years whilst still parenting, and managing your own life?

The truth is, investing can be challenging, involves a good amount of fancy jargon, and the finance industry globally likes to be elitist.  While it is wise to grow your skills as an investor,  the financial management of your trust fund should be handled by professionals, and we do advise you to seek the services of a professional financial advisor. 

Before we start to toot our own horn here about Boutique Portfolio Management, and how our sole goal is turn all Trinbagonians into millionaires using our financial expertise, let’s get back to this blog – how to make that inheritance!

The final and crucially important step is that you must monitor the performance of your investment against the investment objective (aka, you got to watch that fund and make sure that it actually is on track to fulfil its goal).

Here’s where having financial advisors are key. You see, the periodic monitoring will help you ensure that you are on target for your goal, and it will also allow you to make any changes, as necessary. You can keep going as you are or maybe surpass your target by several 100k by working with your advisor to keep the fund in a high yielding portfolio at the right time.

The importance of the right advisor for you cannot be overemphasized. 

Here at Firstline Securities, we offer Boutique Portfolio Management, where we work closely with clients to create bespoke portfolios to help you create the wealth that you are ready for.  How do we do this? We simply have the best team of analysts and advisors all with the expressed aim to make Trinidad and Tobago into a truly financially wealthy society. Our company is not just working to “earn our own keep”, we find real joy in transforming every single one of our clients into millionaires and multimillionaires. That is our goal.

We will start with you where you are, and map out your own personal path to wealth, so you can focus on your life, while we help you reshape what you thought was financially possible for you.