"Wow, I really made a lot of money this summer!" This is becoming a very typical statement of teenagers today due to the availability of some low-paying but consistent work for today's teens. Now that they have worked hard for their summer cash, how can we as parents influence them not to "blow" it all on shoes, clothes, video games, or an iPod?
Start by having some numbers speak for themselves - and to your children. Suppose your 14-year-old started investing $2,000 until age 25. Now let's suppose that after 10 years she stopped adding more money, but the $20,000 she had invested was allowed to grow and compound. The same year she stopped investing, her brother started putting away $2,000 annually and continued to do so for 30 years, contributing a total of $60,000.
At the end, when both pulled out their money at age 65, your daughter would stomp her brother. Even though she set aside only one-third the amount he did, she would have made $556,000 compared to his $329,000 (using 10% annual return on an investment). The big reason: Her original investment of $20,000 - although much smaller than Bart's $60,000 - had 10 more years to compound. That's the advantage of starting to save while you're young. These should be eye-opening numbers for anyone and may make a difference when your teens want to reach into their wallets to spend all their hard-earned money.
A second step to persuade your teen to stash some of that summer cash is based on semantics. It is much more cool to "invest" than "save," and it's just as cool to be considered an "investor" as opposed to a "penny-pincher." Instead of buying those expensive Nikes or that incredible dress from Juicy Couture, how about owning a piece of Nike or Juicy?