I came across and interesting CNN article the other day that mentioned younger people were not getting involved in their company 401k or equivalent retirement plans. It’s a shame too because they’re missing out on using the #1 secret to investing. TIME! I certainly can’t blame them though; I didn’t get into the financial management swing until my mid-late twenties, and some people don’t even get in it then. But if you’re 18 years old and start investing now, you’ve got 50 years worth of time on your side to invest! Who do we blame?
Even something miniscule to get the investing box going – even 1% of your salary is going to START working for you at 18 is going to have a significant impact in 50 years. Even if you make just 20k per year, investing $200/year or less than $20 per month, you’re going to have $250,000 (at a reasonable 10% rate of return) by the time that 50 years rolls around. Conversely, if you wait until you’re 28 and do the same thing, that $250,000 bucket is only going to hold $97,370! How important are those first years? EXTREMELY important.
So how does that fall into the “blame” category? Well, yea, you can put it on the kids and say they didn’t research like they should have, they played video games, and went out on Friday nights. But honestly, where does it come from? I’d say it is 2 pronged – We really do need to have a mandatory financial education class in our schools (or at least make it an elective course). Or as the 2nd prong, how about having responsible enough parents that can teach their children the financial ropes? Why don’t parents teach their kids the ropes? Well, I’m sure it has to do with what is handed down. Kids learn a LOT from their parents, why not teach them something that will likely be the most valuable information they’ll use in the future?
“But Hank, I never learned how to save, let alone invest. I rent my house and can barely pay rent. How can I afford to invest?”
I’m not saying you should invest, I’m just saying you should teach financial responsibility. My parents grew up pretty poor, and when my dad left, we were even poorer, but I never knew that. My mom went on like it wasn’t that big of a deal and sheltered us from the financial reality she faced each day. I honestly would have liked to be part of that problem, or at least help with finding a solution. I would have been more than willing to help, but as the “baby boomer” generation grew up, they NEVER spoke of money anywhere, not even to their own families.
Ultimately the world will function fine with kids not investing in their futures or learning anything about financial education. The pool of money that is out there is only going to grow in the future, and the potential candidates are shrinking – that crafts a pretty picture for those of us that KNOW about financial responsibility and investing. There’s no time like the present to start on the path to financial freedom…