Give Your Kid a Million Dollar Graduation Gift

The springtime rites of passage are here: baseball, post season basketball and “pomp and circumstance.” College graduation ceremonies are starting to take place, and maybe you’re wondering, “What gift should I give my new college graduate?” An electric razor, an iPad, a security deposit for an apartment? Here’s an idea: How about helping your kid become a millionaire? That’s right, a millionaire!

It’s actually easier than you think. First, set up a Roth IRA for your college graduate. Then, make certain that you or your graduate (if he or she’s landed a job) fund it by contributing $3,500/year. After 45 years and assuming the investment gets a 7 percent non-guaranteed return, the account will be worth a little over one million dollars. Mind you, that’s one million tax free dollars for your young graduate at retirement.

A brief primer on Roth IRAs: one must have earned income to contribute to one. So if your college graduate is living at home, not working and doesn’t find employment for several years, he or she can’t do a Roth. Conversely, if they earn a small amount of money–say $3,500–they are eligible for a Roth IRA, and you (the parent) can make the contribution from your money. I suggest, though, that your child contributes a portion of the money to have “skin in the game” and ultimately takes over 100 percent of the contributions.

Many people will say, “Let’s wait until my child is more mature and start the contribution 10 years from now.” However, what most people don’t realize is that waiting 10 years at the same contribution level and the same 7 percent return results in an account worth about $500,000. In other words, waiting ten years and missing $35,000 in contributions cost your kid a half million dollars! Ouch. In my business, we call that the time value of money.

So as you’re pondering a graduation gift, you may want to consider giving your child an investment that will give them security and peace of mind through their golden years.

Death Takes a Holiday at Banfield Pet Hospital

Well, it finally happened. About a month ago, we had to put our fifteen-year-old dog, Cookie, down. Cookie was not only our dog but a treasured and shared pet of our neighborhood, too. She was very sick, though, and it was time. The funny thing is, however, it’s Banfield Pet Hospital that just can’t accept that Cookie’s gone.

You see, we switched to Banfield about nine months ago. We were happy with the care and Banfield’s unique medical plan. The plan cost about $35 a month and covered most of the vet visit costs. When Cookie died, I naturally thought that we would stop paying the plan premiums. Doesn’t death trump all? But as my wife and I soon learned, Banfield has found a way to cheat death.

I should have known something wasn’t quite right. After putting Cookie down, I asked the kind Banfield employees at the front desk to call corporate and take Cookie off the plan. In the past, they’d been always helpful, but instead, they told me that I had to call because they weren’t authorized to cancel the plan for me. (Mind you, I didn’t have to call corporate when we signed up for the plan). When I called corporate, I was told we couldn’t take Cookie off the plan until her twelve month anniversary of being in the plan. I said, “What do you mean we can’t stop the plan? She’s dead.” “I’m sorry for your loss,” the corporate drone said, “but she isn’t dead according to the terms of the contract.” Now I’m really getting steamed. “But your vet put her to sleep right before Easter, and she hasn’t risen from the dead! Besides, I paid an additional $250 that wasn’t covered by the plan to put her to sleep.” “Well, I’m sorry, sir, it’s like this: You signed up for a twelve-month contract.” “I understand,” I shouted, “but she’s dead for crying out loud!”

Infuriated, I tried to reason with him and explained that when old people die, the United States government stops charging Medicare premiums to the newly deceased. “I’m sorry, sir, but Banfield’s policy is different.” I realized I was up against a double-speak corporate wall and demanded to speak to his boss. I got her voicemail and began leaving her a not-so-nice message.

By now, my secretary is peeking her head inside my office, her eyes growing wide wondering why I’m screaming into the phone. I’m not giving up, and I call my local Banfield vet’s office which up till now has been very pleasant to work with. I explain my plight, and instead of an apology, I get the same corporate mumbo jumbo. “Yes, the dog is dead,” (at least they agree with me on that point), “but you still owe three months of premiums according to the plan.” “But the dog is dead!” I scream. “But, sir, we tell everyone when they sign up that it’s a twelve-month plan.” “But death trumps all,” I said completely exasperated. “Sorry, sir, at Banfield, we feel differently.”