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As you approach adulthood and start to think about your future, are you ready to be financially responsible for yourself? If you answered yes, congratulations—you’re ahead of the game! But if you answered no, don’t worry—there’s still plenty of time to set yourself up for success.
Whether you’ve never stepped foot in a bank or you are actively saving and investing for your future, all it takes is a little effort and a lot of patience to become confident in your financial decisions.
A Millionaire’s Best Friend
One awesome thing you can take advantage of is compound interest. It may sound like an intimidating term, but it won’t be once you know what it means. Here’s a little secret: Compound interest is a millionaire’s best friend. It’s really free money. Seriously. But don’t take our word for it. Just check out this story of Ben and Arthur from our Foundations curriculum to understand the power of compound interest.
Ben and Arthur were friends who grew up together. They both knew they needed to start thinking about the future. At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% interest rate. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds.
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Now Arthur didn’t start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% interest rate as Ben, but he invested for 31 more years than Ben did. So Arthur invested a total of $78,000 over 39 years.
When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?
Believe it or not, Ben came out ahead . . . $700,000 ahead! Arthur had a total of $1,532,166 while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.
Related: Imagine how much faster your nest egg could grow with an extra $700 or more. You could find money like that simply by having an independent insurance agent check your insurance rates.
What You Can Do Now
The trick is to start as soon as possible. Talk to your parents or teachers about how to open a long-term investment account so you can become a millionaire, too. And remember, waiting just means you make less money in the end. So get moving!
Start your college journey off right with The Graduate Survival Guide! You’ll learn about common mistakes college students make, including student loans, credit cards and more. Order your copy today!