wise words
dave says
How Your Teen Can
Become a Millionaire
As you approach adulthood and start to think about
your future, are you really ready to be financially
responsible for yourself? If you answered no, you’re
not alone.
Pretty scary, isn’t it? If you think about it, most of your friends
probably don’t know how to balance a checkbook. In fact, very
few teens actually have a savings account or know what long-term
investing means. Do you?
Whether you have never stepped foot in a bank or you are actively
saving and investing for your future, all it takes is a little effort and
a lot of patience to become confident in your financial decisions.
A MILLIONAIRE’S BEST FRIEND
One awesome thing that you can take advantage of is compound
interest. It may sound like an intimidating term, but it really isn’t
once you know what it means. Here’s a little secret: compound in-
terest is a millionaire’s best friend. It’s really free money. Seriously.
But don’t take our word for it. Just check out this story of Ben and
Arthur to understand the power of compound interest.
AGE BEN INVESTS:
19
20
21
22
23
24
25
26
27
28
29
30
35
40
45
50
55
60 2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
0
0
0
0/yr
0/yr
0/yr
0/yr
0/yr
0/yr
0/yr
65 0/yr
Ben and Arthur were friends who grew up together. They both
knew that they needed to start thinking about the future. At age
19, Ben decided to invest $2,000 every year for eight years. He
picked investment funds that averaged a 12% interest rate. Then, at
age 26, Ben stopped putting money into his investments. So he put
a total of $16,000 into his investment funds.
Now Arthur didn’t start investing until age 27. Just like Ben, he
put $2,000 into his investment funds every year until he turned 65.
He got the same 12% interest rate as Ben, but he invested 23 more
years than Ben did. So Arthur invested a total of $78,000 over 39
years.
When both Ben and Arthur turned 65, they decided to compare
their investment accounts. Who do you think had more? Ben,
with his total of $16,000 invested over eight years, or Arthur, who
invested $78,000 over 39 years?
34 |
Summer 2017
www.potentialmagazine.com
by Dave Ramsey
ARTHUR INVESTS:
2,240
4,749
7,558
10,706
14,230
18,178
22,599
27,551
30,857
34,560
38,708
43,352
76,802
134,646
237,293
418,191
736,995
1,298,837 0
0
0
0
0
0
0
0
2,000
2,000
2,000
2,000/yr
2,000/yr
2,000/yr
2,000/yr
2,000/yr
2,000/yr
2,000/yr
$2,288,996 2,000/yr
0
0
0
0
0
0
0
0
2,240
4,749
7,558
10,706
33.097
72,559
142,104
264,665
480,660
861,317
$1,532,166