Is it normal that all I care about at 14 is saving money and getting rich?

Question: Is it normal that all I care about at 14 is saving money and getting rich?

Is it normal? No. Few people — regardless of their age — are interested in saving and investing money.

Even many of those who might be interested in investing money, aren’t actively doing so. Less than half of all adult Americans have any money invested. That’s certainly not going to help them live and retire comfortably. [1]

Given your interest, I suspect that unlike most Americans, you will eventually amass a great deal of money. You have something that few among those of us who are interested in saving and investing have. You have time. The more time to have to allow your money to compound and grow, the more money you will eventually have. [2]

Warren Buffet, one of the greatest investors of all time made most of his money after his 50th birthday. He will be the first to tell you that it wasn’t primarily due to his investing skills — which are superior to almost everyone on the planet — but because his money had time to compound and grow.

Buffett made 99% of his money after the age of 50

When Buffett was 50, he was worth $67 million. Today, roughly 36 years later, he’s worth over $62 billion! [3]

Since you are just 14, your money has many decades to grow. If you were able to invest $100 every year, 50 years from now, when you turn 64, you could have almost $150 thousand. If you invested $1,000 every year, you would have 10 times than amount, or $1.15 million. (This assumes a 9.7% annual rate of return from investing your money in the S&P 500 index fund. There is no assurance that you will receive this return, but this has been the average over the past 100 years.)

Just $1,000 a year. That might seem like a lot to a 14 year old, but this is just an example. Invest as much as you can. Increase your investments every year, whenever you get a raise at work. The more you can investment, the more you will have.

Even if you don’t invest every year forever and only invest when you are young, time and compounding will work for you.

Here’s a snippet from my book: Building Wealth for the Rest of Us

THE MAGIC OF COMPOUNDING

I just showed you how you could attain wealth by saving just $10 a day, provided your money could be invested for a long enough period of time. If you opt to start saving later in life you will have to put away a lot more in order to amass that same amount of money. The earlier you start saving and investing, the less money you will need to invest to achieve the same or better results. This may be the most important concept you should understand from reading this book (you should teach this to your children if you have any). I urge you to pay particular attention to this next bit of information. If you don’t feel the need to start saving as early as possible, I guarantee that you will after reading on.

Assume Betty and Bob are both 21 years old. Both Bob and Betty elect to invest $2,000 every year for their future. Bob figures that he’s young and has plenty of time before he needs to start putting money aside for his future. As such, he decides that he’s going to spend whatever money he has now, have fun, and wait until his 30th birthday before he starts investing. After all, starting at 30 still gives him 35 years to save up for retirement, and that should be plenty of time. Betty decides not to wait, but rather to start investing right away, at 21. She invests her $2,000 a year, each and every year, but for whatever reason, she decides to stop investing when she turns 29. So Betty only invested her money for nine years, from age 21 through 29.

For illustrative purposes, we will assume that both Betty and Bob found a group of investments which have had an average return of 12 percent annually. The year-by-year comparative results are in the following table.

Betty invested $2,000 every year for nine years, from age 21 through 29 and didn’t invest any additional money after that. Bob didn’t invest any money at all until his 30th birthday. At that point he started investing $2,000 every year, from his 30th birthday through his 65th. At 65, Bob wound up with slightly over one million dollars. However, even though she’d contributed less, and only invested money throughout her 20s, Betty wound up amassing almost twice as much as Bob. At 65 she had nearly two million dollars!

Perhaps equally surprising is the true effect of compounding. Betty, who invested money only during her 20s, invested a total of only $18,000 ($2,000 a year for nine years). By her 65th birthday, she had a net worth of $1.957 million. That’s a 10,774 percent gain on her investment.

Bob’s returns, in and of themselves, are quite impressive as well. He started investing when he turned 30, which many people consider early. He invested $2,000 a year, every year until he turned 65. That’s a total investment of $72,000. Bob turned that $72,000 into $1.085 million. That’s a 1,407 percent gain. Bob’s 1,400 percent gain on his investment is fantastic, but it pales in comparison to the more than 10,000 percent that Betty achieved.

What was the key to Betty’s success? Time! Betty had more time in the market. More time for her money to compound and grow. Time is the key factor. “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it,” said Albert Einstein.

You are not normal, few people — regardless of their age — are interested in investing. I suspect that you interest will allow you to become wealthy. Time and compounding will enable you to become very, very wealthy.

Invest as much as you can. Increase your investments over time. Best of luck.

Footnotes

[1] Over half of Americans have $0 in stocks

[2] If you invested $1.50 the last time the Cubs won – Dollar Bits

[3] The Motley Fool

image credit: reynermedia

originally publishing: Quora

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