Episode 05 — Dangers: Inflation & Fees
Duration: 12 minutes
Two silent forces working against your child's financial future every single day — and how to defend against both.
Episode Overview
Duration: 12 minutes
Human behaviour is not the only danger to your child’s financial future. Two external forces work silently in the background — inflation, which erodes the value of money that sits still, and fees, which compound against you at the same rate returns compound for you. Neither announces itself. Neither feels urgent. But over eighteen years, both can quietly take a significant portion of everything you have built. Understanding them is the first step to protecting against them.
What You'll Learn
- What inflation is and what causes prices to rise over time
- How inflation quietly reduces the value of money sitting still
- Why your savings account may be losing value in real terms
- The true cost of management, broker, advisory, and custody fees
- Why the first investment decision you make is the most critical
Key Takeaways
Inflation is unavoidable
You cannot stop it — but you can ensure your money grows faster than it erodes.
Fees are a choice
Every layer of cost compounds against your child’s future. Know exactly what you are paying.
The first decision matters most
Where and how you invest determines the fee structure from day one — and its impact over eighteen years.
Episode Summary (click to expand)
An overview of what’s covered in this episode.
In the previous episode, we met the dangers that come from within — the Procrastinator, the Reactor, the Follower. Today, I want to talk about two dangers of a very different kind. These ones don’t announce themselves. They don’t feel urgent. They don’t trigger an emotional response. Which is exactly what makes them so effective at quietly destroying wealth. They are inflation and fees.
Inflation
Most parents know inflation exists. What most parents don’t fully grasp is what it does to their child’s financial future in real numbers, over real time. In this episode, I go deeper than episode one. I explain what actually causes prices to rise — production costs, supply and demand, global forces — and more importantly, what that means for money sitting still.
The number that changes everything: at a long-term average inflation rate of 3%, the purchasing power of money halves roughly every 24 years. A savings account earning 1% isn’t protecting your child’s future. It’s quietly melting it. I walk through exactly why your money must at minimum keep pace with inflation — and why beating it, even by a few percentage points, is where real wealth begins.
Fees
Fees seem small. Fractions of a percent. Easy to overlook, easy to accept without question. In this episode, I run a real example that shows what those fractions actually cost over 18 years.
Starting with $5,000 and investing $100 a month at a 7% average annual return: with low fees of around 0.2%, you end up with roughly $59,000. Stack a typical combination of management, platform, and advisory fees to around 2% per year — same investment, same return, same 18 years — and you end up with roughly $47,000.
That difference is $12,000. Gone. Not to the market, not to a crash, not to bad luck. To fees. On a total investment of $26,600, that is nearly half of everything you ever put in — compounding against you, the same force working in reverse.
What You Can Do
Inflation is a force you can’t control. But you can control what your money does in response to it — which is exactly why we invest. Fees are different. Fees are a choice. And that choice begins with the very first investment decision you make. I explain why getting that decision right changes everything for your child’s future — and what’s coming in the next episode to help you make it.
Listen to the full episode to hear the complete numbers, the real-world examples, and the thinking I share to help you protect your child’s financial future from the forces working silently against it.