WHERE DOES A TEEN turn for advice on money? I went to my late father. My conversations with him are burned into my memory like software on a computer.
“Do what you love and make it pay.” “Give your all enthusiastically.” “You can get whatever you want if you are willing to work for it.” “What you make is important, but what you do with what you make matters more.”
When I was 15, my dad said, “Son, there is a secret you should know. You can keep all of your life’s earnings if you leverage compound interest, by getting in the habit of saving and investing early.”
That conversation had a profound influence on my future. It is the reason I read The Richest Man in Babylon as a teenager. It is the reason I became familiar with compound interest. It is the reason I began automatic savings and investment plans immediately after graduating from college.
In just a decade, I witnessed what seemed like a miracle. Compound earnings and dividends from my investments were providing more fuel to my nest egg than I was. That was a glorious day, particularly for a kid from Frogtown, which neighbored Dogtown and which was nowhere near the nearby town of Beverly Hills.
Here’s a set of numbers every teen should be introduced to: 10, 10, and 40. Invest 10% of everything you earn. Imagine you earn a 10% average annual return. (That’s probably optimistic, but it makes the math work.) Over 40 years, your nest egg will grow to equal the value of your entire life’s earnings.
Have your teens do the math. It helped me and it will help them. There are lots of calculators online that make it easy.
Sam X Renick‘s previous article was Raising Them Kids. Sam is the driving force behind the “It’s a Habit” Company and its chief spokesperson, Sammy Rabbit, who is dedicated to improving children’s financial literacy. Sam has read and sung off-key with over a quarter million children around the world, encouraging them to get in the habit of saving money.