Saving is overrated!

Find out why…

Dec 12, 2021

A recent market study conducted by Carli Solicito at Georgetown University revealed more than 50% of parents said their #1 reason for teaching their children to invest is to provide them with a better financial future. Even more interesting was that the participants were a mixed bag. Some parents were financially educated growing up, and others were not. This shows us that regardless of the parent's level of financial fluency, the majority believe investing is important for their kids.

To better understand, let me tell you a story!

Penny & Elle are seven years old.

Penny received $25 a month for 9 years from her parents for completing chores; by the time she was 16, she had saved approximately $2,700 in allowance funds!

Elle received $25 a month for 9 years from her parents for completing chores, but instead of saving her money, Elle started to invest her money. Elle, on average, had a portfolio return of 7% per year. She was lucky enough to grow up through a bull market.

Elle had approximately $3,728 invested by the time she was 16, assuming Elle’s parents opened up a tax-friendly account like a 529.

At 16 years old:

Penny’s savings account = $2,700

Elle’s Investing account = $3,728

Penny & Elle also start to work part-time!

Penny started to work at McDonald’s for $16 an hour, her monthly income was $300, and she decided to save 30%. Penny saved $90 per month for the next 2 years. This allowed her to save $2,160.

Penny’s total savings = $4,860

Elle started her own dog walking business & similar to Penny; she had a goal of saving 30% of her earnings.

For the first year, Elle walked 4 dogs in her neighborhood. Each walk costs the owners $15 for 30 minutes of walking time. Elle did this 3 days a week for the group of 4 dogs. Earnings a monthly income of $810 a month on average for the first year. She was investing $243 a month (30% of her earnings).

Elle total Investment account at the age of 17 = $7,014

The following year, Elle’s cute furry client list grew! Now she had 8 dogs that she walked 3 times a week for $15 per session. Elle earned a monthly income of $1,620. Still saving 30% of her income. Elle contributed $486 a month to her investment account.

At 18 years old:

Penny’s account = $4,860

Elle’s account = $13,556

If only Penny had learned how to invest. Following the same path of part-time work, If Penny started to invest at 16, she would improve slightly over the 2 years.

Time is really the secret ingredient.