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FINANCIAL PLANNING
For as long as I can remember, I have wanted to grow up to be just like my dad. I have carefully observed him for the majority of my
life trying to learn and find success in ways that he has. Ever since my dream of becoming a major league baseball player ceased to exist, I’ve wanted to help people with retirement planning, just like him. He has told me invest- ing at a young age is one of the best things you can do to help your future self. I’m aware that some of you reading this article may be past the point of starting young, but perhaps your kids or grandkids could benefit from it.
WHY START YOUNG?
Why would you start investing early
in the first place? Expenses stack up and
you want to enjoy your youth, right? Most Americans decide to start investing once their youth phase is coming to an end. The average
age people start investing for retirement is 29 years old. Only 26% of people start investing before the age of 25. I understand that investing at a young age may seem difficult due to the lower income. However, studies have actually shown that investing in your 20’s is easier than investing in your 30’s or later. The reason is because although income is lower in your 20’s, so are expenses. The
vast majority of young adults don’t grasp the opportunity they have with time on their side.
RULE OF 72
When I was much younger, my dad started a foundation called Livastride. This is a suicide awareness foundation in honor of my late uncle, Brody. My dad began holding a financial boot camp in attempt to teach high school students about investing at an early age and the impact it can have.
According to studies, financial distress is one of the top causes of suicide today and was
a factor that led to the death of my uncle.
It was at one of these financial boot camps where I first learned about the Rule of 72. I’d like to pass that knowledge along to you. It’s very quick and easy and is a great lesson to teach your kids and grandkids. The Rule of 72 starts by taking 72 and dividing it by your rate of return. For this example, we will assume a long-term market average of 10% for the return. 72 divided by 10 equals 7.2. Therefore, assuming a 10% return, it would take about 7 years to double your investment. I have created a table below to illustrate how impactful a small investment can be when you have time on your side.
This example shows an initial one-time investment of $2,000 at 14 years old. No contributions are made.
STARTING YOUNG by Cade Peterson, Financial Planning Associate
“By showing your kids and grandkids the Rule of 72, you are engaging them and showing them the benefits of investing if done right.”
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