According to Walter Hamilton of Los Angeles Times and new studies, "The average millennial (people in their 20s or early 30s) graduating from college today will not retire until age 73 because heavy student-loan debt will prevent him or her from saving enough money for an earlier retirement...by the time the college bills are paid, the average millennial will be 33 years old and have only $2,466 saved for retirement...student debt will cost the average millennial $115,096 in "lost" retirement savings." We haven't reached the stage of student loans or graduating from college yet, but be aware! Save, save, save. As soon as you get a job start putting money away to build up your retirement. If the company you work for has a retirement plan you need to understand how it works and contribute the maximum that you can afford. Every time that you get a salary increase, add more to your retirement so you are paying yourself. If there is no retirement plan then you need to open up a ROTH IRA (individual retirement account). The earlier you start saving the more money you will have for retirement.
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1
Don't carry any credit card debt. Pay it every month and always pay on time!
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 interest 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.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?
Believe it or not, Ben came out ahead … $700,000 ahead! Arthur had a total of $1,532,166, while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.
Here is the link: http://www.daveramsey.com/article/how-teens-can-become-millionaires/lifeandmoney_kidsandmoney/
Many people don’t know how to invest their money and how to save; their ignorance is what got our economy in the hole. For example, people thought that a credit card is free money, but what they don’t realize is that they have to pay the money back, including interest. To fix this problem, I think that high schools should offer classes on finances because when they leave high school they don’t know how to manage their money. And in college, there are a lot of finances that students have to deal with, but because no one taught them how to save and invest safely, they will most likely have to work to 72 years old. Students learning about how to manage their money will not only help them in their future, but it’ll also help the economy.
ReplyDeleteWow Kinsey thank you ! I'm like speechless right now because i think that this will help a lot of people get an idea of how financing works. Even I don't get how it works but after reading Ben and Arthur's' story I kind of get it. I also agree with Kaylin about having financing classes because financing is a really complicated concept and it's important that we learn it so that we don't get cheated on our money in the future.
ReplyDeleteThank you so much for the useful information. Now-a-days school tuition is so expensive causing many students lean towards student loans when a student didn’t receive scholarships. On top of college tuition students also pay for food, housing, and other amenities in their day-to-day life. Reading this article helps out because students should start learning how to manage their money wisely. Not only does students have to pay for tuition and life amenities, but I am sure many students can’t resist having leisure time such as movies or shopping, which can cause the student to be buried in debt. Plus if a student applies for a credit card, some people can forget that it is not free money. The students start spending so much money using the credit card and end up being more in debt. So thank you Kinsey for this article because it is an eye opener and helps prepare us seniors to start saving for the future. As soon to be college students we need to start thinking about what is next in our life. We are going to be independent soon, and managing money is one of the important factors in one’s independent life. I also believe what Kaylin said is true that money management not only will it help a student's future, but also the economy.
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