How Much Do You Need to Save to Make Your Baby a Millionaire by Retirement?
It’s more about when you save than how much you save.
What if you could set your baby up to be a millionaire before they even start their career?
Thanks to the power of compound growth, you can. With enough time, even relatively small contributions in early childhood can snowball into seven figures by the time your child retires. But how much do you actually need to save to make that happen?
The answer depends on a few key assumptions, but the takeaway is encouraging: Time matters far more than the amount.
How much do I need to save?
First, define the finish line: $1 million by retirement.
Let’s assume your child won’t touch the money until age 67, the full retirement age for those born 1960 and later. Second, let’s say that you begin investing shortly after they’re born, so you’ve got nearly seven decades to let the money grow.
Historically, the stock market has returned around 6% to 7% annually after inflation, according to Kevin Mahoney, CFP, founder and CEO of Illumint. While future returns may be lower or higher, this range is still a common baseline for long-term planning.
For the purposes of this exercise, we’re calculating a 7% annual return after inflation over 67 years of compounding. Based on standard compound interest formulas, this means you either need to make:
A one-time investment of about $10,800 at birth
Ongoing contributions of around $85 per month for the first 18 years
If you stretch contributions out longer, the monthly requirement drops significantly. But if you shorten the timeline, contributions will increase dramatically.
That’s the magic of compounding: The earlier the money goes in, the less you need to contribute overall. Money invested at birth has decades to grow, and those early years are disproportionately powerful. A dollar invested in year one has far more impact than a dollar invested in year 20.
That means the biggest advantage your child has isn’t how much you save but when you save.
Unfortunately, a million dollars decades from now won’t have the same purchasing power it does today. While a 7% return already accounts for inflation, if your goal is specifically to create a future millionaire, you may want to aim higher or adjust your target to reflect what that money will actually be worth.
For example, $1 million in 67 years might feel closer to a few hundred thousand in today’s dollars, depending on inflation. If you want to account for that erosion, you could choose to target a higher number such as $2 million. That means doubling the numbers for a $1 million retirement to:
A one-time investment of about $21,600 at birth
Ongoing contributions of around $170 per month for the first 18 years
Where should I invest the money?
Where you put the money matters almost as much as how much you invest. And there are plenty of options, which include:
530A accounts (Trump Accounts): A new type of tax-advantaged account designed for eligible children under age 18. Children born between 2025 and 2028 qualify for $1,000 in seed money.
529 plans: An account that helps families save for education costs, offering tax-free growth and tax-free withdrawals when used for qualified expenses.
Custodial IRAs: An individual retirement account opened by a parent or guardian on behalf of their minor children who have earned income.
UTMAs: A custodial brokerage account opened for a minor and overseen by a parent or guardian.
While each of these accounts have their own pros and cons, they can be “problematic” retirement vehicles for one simple reason, Mahoney says. With the exception of the 529 plan, all of the above will be controlled by the child when they become of legal age.
“Parents lose control, and some won’t want their kids to have access at that young of an age,” he says. “I imagine many families overlook that dynamic.”
Instead, he recommends one of the following options:
Setting up a trust in the parents’ name, which allows parents to dictate the terms of when and how their child receives the money, whether it’s installments at certain ages or in a lump sum.
Opting for a gifting strategy in which parents invest in their own account and make a financial gift to their children when they want. The IRS annual gift tax exclusion for 2026 is $19,000 for individuals (couples can give joint gifts of up to $38,000); anything above that and families will have to report it on their taxes.
“These options make it easier to maintain control and engagement,” Mahoney says.
That’s not to say you should rule out savings vehicles designed specifically for minors entirely. For example, Mahoney explains, some parents might overlook saving for college in their quest to save for their child’s retirement—but utilizing a 529 plan that allows a child to graduate from college with little to no debt can give them “a similar financial boost” compared to just saving for retirement.
Mahoney doesn’t recommend a 530A account for families who want their baby to retire as a millionaire. “They’re helpful for lots of people, but the tax reporting and regulations can be very onerous and set people up to fail,” he says. “The seed money and an employer match is nice to set it up for, but I wouldn’t use it past that.”
It might help to take a layered approach to saving for your child’s future, opting for a main savings vehicle under your name that can optimize contributions for a child’s retirement and using another type of account under their name as a supplement. Each option has trade-offs, but the core principle remains the same: maximizing time in the market is most important.
The bottom line
Of course, helping your child become a millionaire is a great goal—but not at the expense of your own financial security. Your own retirement (and emergency savings) comes first, then your child’s education. If you still have financial room to move, then saving for your child’s retirement is a great idea.
Instead of focusing strictly on hitting $1 million, you can also reframe the goal. Even a modest early investment—say, a few thousand dollars—can grow into a meaningful foundation a child can build on. By the time they enter the workforce, they may already have a significant head start.
From there, your child’s own contributions, employer retirement plans, and continued compounding can do the heavy lifting to help turn them into a millionaire.
In that sense, you don’t necessarily need to “do it all” for them. You just need to get them started.
