Wealth Building from One-time investment: Why your Rs 5 lakh investment gift on your kid's 5th birthday can give them Rs 2,64,00,000 corpus at their 40th birthday

Wealth Building From One-time Investment: Gifting an investment on your kid's 5th birthday may be uncommon but is a unique idea as it can create significant wealth for them when they are young. The best part is the investment will grow passively without your kid making any effort. When the kid is in their early 40s, they may use it to fulfil their financial goals or for an early retirement. Likewise, if you gift a Rs 5,00,000 investment to your kid on their 5th birthday, by the time they turn 40 years old, the same investment can grow to an estimated Rs 2,64,00,000 corpus, or nearly 53 times. Know how it may be possible.

Why gift investment to your kid

We generally gift things that surprise others.

Our purpose is the same when we gift something to our kids.

We want to see a smile on their face after they get their prize possession.

A 5-year-old has no thrill about any investment.

They don't know its importance at such a tender age.

The investment may not have any value for them now, but it is most likely to surprise them when they grow and the investment value also increases.

Having such a corpus can be a great boost for their life.

Benefits of investing early 

When you give sufficient time to your investments, they can grow many times because of the power of compounding.

As time passes, an investment grows faster because of compound growth.

If you are making an investment for your kid, the investment may grow to a large corpus by the time they turn 30 or 40 years old.

You may not need to make a large investment to create a sizeable corpus if you invest when your kid is 5 years old. 

How Rs 5 lakh investment may grow to Rs 2,64,00,000

If your kid is 5 years old and you make an Rs 5,00,000 investment for them that gives a 12 per cent annualised return, the investment will grow to an estimated Rs 2,64,00,000 corpus by your child's 40th birthday. 

In 35 years, the total estimated gains at a 12 per cent annualised return will be Rs 2,58,99,810, while the estimated corpus will be Rs 2,63,99,810. Let's see how your investment can grow in those 35 years.

What is more interesting is that if the annualised return is 13 per cent, the estimated corpus will be Rs 3,60,34,253. Here is how it may grow.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)