For example, let’s assume that a 19 year old invests $2,200 per year ($183 per month) in an IRA and earns an 8% return. They will hypothetically retire at age 65 with over $1 million dollars.
Even a few years makes a difference. In the second example, we assumed that our 19 year old delayed saving for five years. The impact of delaying means he or she will have about $353,000 less in their portfolio at age 65, even though the difference in total investment was only $11,000.
Talking about money is difficult. People may not feel comfortable with their knowledge of the subject, or they may feel that it’s an impolite discussion topic. We all want our children and grandchildren to enjoy the best that life has to offer, to do better than us financially and to learn from our mistakes and achievements. Passing on knowledge is one step to helping them succeed financially. It is never too early to start teaching them about the value of money. In fact, the sooner you start the more of a financial edge you will give them.
Content in this article is not intended to be financial advice. Instead, we think of it as educational and financial education is important to us.
The Cincinnati retirement planning firm of Hengehold Capital Management.