It has been said that compounding interest is the 8th wonder of the world.
If this is the case, why are we taught so little about this amazing phenomenon? As a business manager, it’s disheartening to see high schools spend so much time on calculus and trigonometry and so little time on personal finance, basic investing principles, compound interest, and other skills that would benefit everyone regardless of their professional pursuits in life.
When someone is entering the workforce, their salary is often relative to their level of experience. A common misconception is that they don’t have enough to start saving. But what if you could save just a few dollars every day? You may be thinking, “that’s not enough to really invest in anything,” but in reality, it trains you to think about savings first and creating a lifestyle second.
The key to benefiting from compound interest is patience and consistency. Rome was not built in a day, nor are most great fortunes. If you can start early and keep up with your plan, you’ll see how you can make your money work for you over time.
I recently did this exercise with my 15-year-old son. I showed him that if he put away $3.00 per day, equating to $60,225 by the time he was ready to retire at 70 (assuming a 10% return), he would have over $2,000,000.00.
Now with technology and smartphones, it’s really easy to automate this process. For my working teenage daughter, I set up a savings and checking account on her phone. Every day after working, she moves a little amount from her checking into her savings with just a few clicks. Once the savings amount reaches $100.00, we move this into her investments. The more you can make this happen automatically and early on, the easier it will be for young people to reach their goals. And for adults, it’s never too late to start making powerful shifts in your financial life.
Time makes a lot of investors seem really intelligent when in reality, time is more of a gift than intelligence.
Remember, slow and steady wins the race – and this is true with investing and savings. If you could benefit from more personalized guidance to compound interest principles and saving strategies, check out my compound interest calculator or contact me to set up a complimentary consult.
