How I Use a Simple Analogy to Teach Investing

Jonathan Clements, through his decades of work and his recent “Getting Going on Savings Initiative,” has inspired countless people—including me—to think about how to empower the next generation. The initiative’s core mission is to give young adults a tangible head start by funding their Roth IRAs, a concept that perfectly aligns with the most important lesson I’ve ever learned about money: time is a young adult’s greatest asset.

For many years I’ve been that person who talks to younger people about saving for retirement and investing for their future. Through family, friends, church youth groups and my younger employees, I’ve developed a playbook that seems to work more often than not. I’m always thrilled with early success, as the younger someone starts, the better their future investment outcomes tend to be.

I feel an obligation to give advice and build trust with younger generations. Perhaps it’s because of my difficult early financial background. I’m not entirely sure, but if you have ever considered giving financial encouragement about retirement planning, my approach might be helpful. My normal first play is based on this question, asked during an informal chat in a relaxed setting:

“What do you think of this? If I had a machine that let you feed in $1 bills and gave you $20 in exchange, would you be excited?” It’s a no-brainer, and they might ask how it works. I keep it simple and light-hearted, with no details needed. “It’s very simple; there’s a magic spell within the machine called the index tracker investing spell.” I then follow through with another question:

“What if I told you the machine had a timer and only dispensed the crisp $20 note 40 years later? Would you still be happy to swing by every day and pop a dollar in? It’s definitely worth the effort, don’t you think? Your $20 will still buy you the equivalent of $5 in this distant future, but hey, it’s still a spectacular personal win for your wallet.”

This nearly always sparks interest and a conversation about money. The idea is simple and intriguing, and I find it’s a good way to capture young adults’ imaginations. A common question I get asked is, “Is this real?” I normally fire up an online compound interest calculator and get them to play around with it. Finally, I would chat about setting up the right account to feed the money machine.

I would talk about a Roth IRA and the magic of paying no taxes while the money is inside the machine. The even better point is that when you pull out your dollar bills, now transformed into $20 bills, it’s all yours with nothing going to the tax man. At home in the UK I would over time chat about other accounts with different rules and for different goals, unfortunately I’m not familiar enough with your US equivalents to illustrate my point further.

But I think this core principle remains universal: time is a young adult’s greatest asset. It’s the engine that powers the “magic machine. So my hope is that this simple analogy empowers you to spark these conversations yourself. Take a moment to chat with a young person in your life—a family member, a friend, or an employee—and see if you can light a similar spark of financial curiosity. After all, what better gift can we give than a head start on their future?