| | | | Teens and Money – The 10% Solution |
By Bonnie Conrad
Many of us started to earn our own money in our teenage years, and the teen years is a great time to teach your son or daughter the importance of saving and investing. The concept of paying yourself first is one of the most often cited in the world of financial literature, and for good reason. Putting 10% of every paycheck away, where it cannot be spent, is one of the best, and most painless, ways to save for the future. Whether the goal is a short term one, such as the purchase of a first car, or a long term one, like the purchase of a first home or a comfortable retirement, this kind of automatic savings can go a long way.
It is never too early to start what I call the 10% solution, and that solution can start as soon as the teen in your life starts to earn his or her own money. Whether that money comes from babysitting gigs, a job at the local fast food joint or anywhere else, it is important to encourage the young worker to save 10% of every paycheck.
If the teen in question already has a savings account, why not encourage them to have part of every paycheck automatically deposited there? This type of automatic savings is a great way to teach financial discipline and to learn to do more with less. Money that is not seen is often not missed, and pulling money off the top is a great way to start saving and investing.
This commitment to automatic saving will serve the teen well as he or she enters the world of full time employment. Salting away part of every paycheck in a savings account, and later a good investment account, is a proven way to accumulate great wealth over time. The power of compounding, coupled with the discipline of regular saving, is a great way to make small sums into large ones.
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