President Donald Trump has supported a proposal to give each newborn in America $1,000 in a savings account. The idea is simple, but the potential growth is powerful. If the money is invested wisely and left untouched, it could grow into a large sum by the time the child retires. The main reason? Time and compound growth.
Why Time Is a Baby’s Biggest Financial Advantage
Newborns have the biggest investment advantage possible: decades of time. While most adults have around 30 to 40 years to save for retirement, a newborn could have 60 or even 65 years. That long time frame allows compound interest to work more effectively, even with small amounts of money.
A Simple Investment Option: The S&P 500 ETF
For long-term investing, a low-cost and simple option is an exchange-traded fund (ETF) that tracks the S&P 500. This index includes 500 of the largest companies listed on U.S. stock exchanges. Rather than picking individual stocks, an S&P 500 ETF spreads the risk across many companies. Over decades, this method has proven to be both steady and strong.
The historical average annual return of the S&P 500 is around 10%. This includes years of gains and losses, and periods of market volatility. Still, the long-term results are compelling.
From $1,000 to Nearly $500,000 – Or More
To see how far a $1,000 investment could go, imagine it being placed in the SPDR S&P 500 ETF (NYSEMKT: SPY) and left alone for decades. The table below shows how the value of that investment could grow over time, depending on the average annual return rate:
| Year | 9% Growth | 10% Growth | 11% Growth |
|---|---|---|---|
| 50 | $74,358 | $117,391 | $184,565 |
| 55 | $114,408 | $189,059 | $311,002 |
| 60 | $176,031 | $304,482 | $524,057 |
| 65 | $270,846 | $490,371 | $883,067 |
These numbers are theoretical, based on constant annual returns and no withdrawals. But they show how even a small initial amount can become substantial with patience and the power of compound growth.
No Need to Pick Stocks or Time the Market
While some people try to beat the market by picking winning stocks, many experts suggest that long-term investors are better off using index funds like SPY. These funds adjust automatically, adding strong performers and removing underperformers. This reduces the need to track stocks or make complex decisions.
Plus, ETFs are considered lower risk compared to owning individual stocks. They offer a balanced way to benefit from overall market growth without needing active management.
What About Inflation?
It’s important to remember that over 50 or 60 years, inflation will reduce the purchasing power of money. Still, a large balance is better than none. And compared to cash savings, stock market investments have historically outpaced inflation.
A Smart Gift for the Future
Even if the government doesn’t provide a $1,000 head start, parents or family members can still create a strong future for a child by investing early. A one-time $1,000 investment in a reliable ETF could grow into hundreds of thousands of dollars — possibly even enough for retirement.
It may not sound exciting now, but over time, this simple financial move could make a big difference in a child’s life.
Should You Invest in SPY Today?
Before investing in the SPDR S&P 500 ETF Trust, investors should weigh all options. Some experts at The Motley Fool, for example, recently recommended 10 specific stocks they believe could offer higher returns than SPY in the coming years. But for those looking for a steady, long-term option, SPY remains a solid choice.
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