We’ve talked a lot about savings, but you may not realize how important it is to start saving as soon as you can. One of the first things that you can do is to open a savings account that pays interest. Set aside a little bit from your monthly allowance or money you receive for doing a job. It may not seem like you have very much to save in the beginning, but you’ll be amazed how even a little bit can add up over time. (Review my post about the Rule of 72.)
Say a boy deposits $50 per month into a savings account. At a basic compound interest of 5% in five years he could have $481.15 more than if he had just kept the money in his piggy bank.* If he increases the amount that he saves per month each of those five years, he’ll have even more.
Parents: Read about the advantages of saving early in Save Now or Save Later.
*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.