Fortune Favors the Prepared

Did you know that your teenager has the opportunity to retire as a multimillionaire? According to Forbes, by instilling the discipline of consistent saving in an Individual Retirement Account (IRA) from the age of 13 through high school graduation, and assuming a modest average return, that IRA could grow to over $2 million by the time your child reaches a retirement age of around 70.

Being able to understand and utilize this fact further emphasizes the power of starting retirement savings early for your children and the significance of teaching children the value of consistent saving. By providing them with the tools and knowledge to save for their future, we open doors to financial abundance and security throughout their lives. Teaching children the power of saving, earning, and spending is crucial for their financial education and it goes well beyond just short-term goals.

By introducing the concept of saving early, we can help children develop strong saving habits that will benefit them throughout their lives. Teaching delayed gratification, goal-setting, and prioritizing spending choices creates a balanced approach to managing money. Additionally, encouraging children to pursue earning opportunities teaches them the correlation between effort, income, and financial independence.

It is important to remember that the earlier your child starts planning and saving for retirement, the more advantageous it is. Delaying the process will only require them to have higher monthly investments. While it may be tempting for your child to enjoy their full income during their younger years, it becomes increasingly challenging to set aside money each month as they grow older. Waiting too long might even force them to postpone their retirement altogether.

Let's consider a scenario where your child starts investing $100 per month in the market, with an average monthly return of 1% monthly or 12% annually, compounded monthly, over a span of 40 years. Meanwhile, your child's friend, who is the same age, begins investing 30 years later and contributes $1,000 per month for 10 years, also averaging a 1% monthly return or 12% annually, compounded monthly.

So, who will end up with more money saved? The friend will have accumulated approximately $230,000, while your child’s retirement account will exceed $1.17 million. Despite the friend investing more than ten times your child's monthly amount towards the end, the power of compound interest significantly boosts your child's portfolio.

Financial literacy is another essential part of teaching children about saving, earning, and spending. It equips them with the knowledge and skills needed to navigate personal finance successfully.

Introducing financial concepts like budgeting, investing, and compounding interest to children may not be the most exciting topic for them, but it holds immense value in helping them grasp the workings of money and the significance of wise financial decisions. By teaching these essential concepts, you equip your children with knowledge and skills that will have a lasting impact on their lives. This early exposure only helps to prepare them for financial success, stability, and the ability to make informed decisions that shape their financial future.

It is important to encourage children to take on age-appropriate jobs or entrepreneurial endeavors. It not only teaches them the value of effort, income, and financial independence, but it shows them how earning money can contribute to their financial well-being and aspirations.

The actions outlined above not only provide valuable lessons to teach your children about the power of smart financial habits, but also serve as building blocks for a lifetime of financial well-being. By teaching and instilling these principles from an early age, you are nurturing a mindset of financial responsibility, discipline, and long-term planning. This not only benefits their future retirement prospects, but also empowers them to navigate the financial complexities of adulthood with confidence and make informed decisions that lead to a secure and prosperous future.

Need help achieving your financial goals? You can always reach out to your Oppenheimer Financial Professional who can help you take steps, using a variety of financial tools, designed to create your personal retirement outlook