Many of you have kids. And if you don’t have kids you probably have nieces or nephews or close friends with kids. There is very little education about personal finance in our public education system. That leaves parents, grandparents, friends, and family responsible for teaching the next generation about money. What if you aren’t educated about personal finance? What if you don’t know where to start because your own finances aren’t in the best shape? If this is you, start learning about personal finance and work on getting your financial house in order. If you’ve made poor financial decisions in the past, teach your kids to avoid the mistakes you’ve made. No matter where you are on your personal finance journey, teach your kids along the way.
Over the next few blog posts, I’ll cover topics about kids and money. I’ll cover 529 College Savings Plans, Coverdell ESAs, and talking to kids about money. But today, I’m going to end with one very powerful example of compound interest. If you put $365 into a stock market index fund on your child’s birthday every year until they turned 18 and let the money grow at 7% per year until they were 65 years old, your child would have a nest egg of $348,951. A dollar a day. That’s it. I know there are plenty of other things you could you use that money for, but what would it take to save one dollar every day for your child? This is the power of time when compounding your money. I’m not saying you need to go out and start saving this way for your child right now. I just want to make sure compound interest is a topic to discuss with your children. Below is a table showing how the money compounds from their first birthday until they turn 65.
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