While writing this post, I couldn’t help but think about what it would have been like if our parents had done this for us. But, oh well, there’s nothing we can do about it now. I’ll write this post with the intention of doing it for my own children in the future.

In families where there is no substantial business or inherited wealth passed down through generations (= typical households), the most effective way to pass on wealth might be to create an investment account from birth and consistently invest in long-term assets. The investment amount may vary depending on individual circumstances, but it seems that the gift tax limit for children, which does not burden them too much, might be appropriate.

The table below shows the current minor child gift limit with no tax in Korea and the monthly investment amount available.

Age	Limit (KRW)	Monthly Investment (KRW)
0-9y	20M	167K
10-19y	20M	167K
20y-29y	50M	417K
30y~	50M	–
Total	140M	​

There’s no need to think twice about where to invest; it’s a 100% investment in the S&P 500. The investment account can be either a pension savings fund account or a regular account, each with its pros and cons. Investing through a pension savings fund may defer taxation, but there may be many restrictions on withdrawal, whereas with a regular account, withdrawal and usage are more flexible, but capital gains and dividends will both be taxed. Whether to give children freedom or force them to prepare for retirement is up to the parents, haha.

Let’s simulate giving an investment only during childhood (investment principal 40 million won) and see how it goes. As always, for simulations, I use the https://www.portfoliovisualizer.com/ tool.

The investment conditions are as follows:

• Starting Point of Investment: 0 years old
• Portfolio Type: Portfolio Assets SPY (S&P 500)
• Cashflow: Fixed amount contributed per period
• Initial Amount: Although it should be more than 0, I entered 1
• Contribution Amount: 166,667 won
• Contribution Frequency: Monthly
• Simulation Period in Years: 20 years
• Tax Treatment: Pre-tax
• Simulation Model: Historical Returns
• Use Full History: Yes
• Inflation Model: Historical Inflation
• Rebalancing: None

The investment results are shown in three cases. The most realistic result seems to be 50%, with a pre-tax 94.1 million won in hand when the child turns 20, adjusted for inflation. It seems like enough money to start whatever he/she wants, whether it’s going to college, starting a business, or traveling.

Performance	Investment Period	Monthly Investment	Total Principle	CAGR		Appraised Value (KRW)
				Nominal	Inflation Adjusted	Nominal	Inflation Adjusted
Top 25%	20 years	167K KRW	40M KRW	13.1%	10.3%	221M	133M
50%				10.2%	7.5%	155M	94M
Bottom 25%				7.2%	4.6%	107M	65M

If the child, even after becoming an adult, continues to leave the investment untouched, the results are as follows (based on 50%).

Age	Investment Period	Monthly Investment	Total Principle	CAGR		Appraised Value (KRW)
				Nominal	Inflation Adjusted	Nominal	Inflation Adjusted
0-19y	20	166K KRW	40M	10.2%	7.5%	155M	94M
20-29y	10	–	–			409M	193M
30-39y						1.1B	399M
40-49y						2.8B	823M
50-59y						7.5B	1.7B

This kid seems to have all their retirement plans sorted without saving a penny from their job. The compound effect turns an initial investment of 40 million won into the miraculous sum of 7.5 billion won after 60 years. Yet another day to regret and be angry about not starting pension investments early.