First Lesson for 2015 - Time Value of Money Here’s a practical and achievable way to get your children, nieces and nephews (and yourself and everyone in the family!) started with saving at the start of the year. Not only that the young ones will learn excellent habits of putting aside for the future and understand the value of delayed gratification and wealth creation but you are teaching them develop life skills and long-term orientation - key ingredients in personal and financial success. Lets put that into context – assume an 8 year old that receives P100.00 a week. You can teach your child put aside 10% of this amount (P10.00) each week so that at the end of the year he/she would have saved P520.00. Let’s say you increase the allowance each year (3rd column, Table 1) until the child reaches age 17. You might think P10.00 each week or P520.00 for the first year is a small amount but if you start early enough and if you do it consistently, regularly and increasingly each year, and at the end of the year you invest the savings at higher than inflation rate (say in mutual funds) and leave it for the next 60 or 70 years, it will amount to a significant amount in the long run (See Table 2). Show Table 2 to your kids, nieces and nephews how dedication to small and manageable tasks is translated into real terms after 10 years, 20 years and so on (we haven’t introduced inflation rate yet at this point). Who says becoming financially independent is an impossible goal? Oftentimes, the lack of access to information and financial capability training shortchange us of opportunities. But it is possible to create wealth. #Financialeducation
Posted on: Fri, 02 Jan 2015 15:17:17 +0000
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