Students who save now will be rewarded later
Published: Thursday, October 24, 2013
Updated: Thursday, October 24, 2013 17:10
Benjamin Franklin knew a thing or two about money. He is known for writing the phrase “A penny saved is a penny earned.”
While he did not actually write those particular words, his quote on the subject is much more accurate; “A penny saved is two pence dear.” He accounted for the miracle of ever accruing interest.
The best aspect of accruing interest is that you not only get interest for the original money you invest, but also on the interest you have earned in previous periods.
$100 at 10 percent interest will give you $10 this year, $11 next year, and so on.
The interest will continue to pile up until it is withdrawn. This makes it wonderful for retirement accounts.
The earlier in life money is invested, the more that it will be worth when the investor is ready to withdraw.
It is an integral step for a student’s future to invest for retirement now and not later.
While it may seem like the money is needed now for other important purchases, time is of the essence.
Many students will have a little extra spending money around the third week of classes after scholarship refund checks are cashed.
A popular idea is to spend this money on some electronic device like a game system or new television.
If a 20-year-old takes the $450 an XBOX or TV would cost and instead invests it now at a 10 percent interest rate, it would be worth a staggering $36,329 when the student is 65.
This is more than an 80-fold return on investment! This brings the concept of opportunity cost to the front of student’s minds.
When $450 is spent on nonessential goodies rather than being invested, the cost is more than $450.
While the electronics only cost $450 today, they ultimately cost the purchaser $36,000 at retirement.
Wealth is not something that you have to be born into in the United States, but can be masterfully accumulated by wise investments.
Warren Buffett, the fourth richest person in the world, has made much of his $58 billion on investments.
Taking the $450 investment example, as well as Buffett’s success into account, intelligent investments can take small sums of money and transform them into massive amounts of personal wealth.
This fact should encourage students to try to be as frugal with money as reasonably possible while investing the excess.
Small alterations in behavior can lead to massive gains in wealth later in life.
It is a very astute decision to save money now rather than waiting until later.
Dr. Pepper tastes a heck of a lot better than Dr. Thunder, but it is important to remember Benjamin Franklin when making even small financial sacrifices: A penny saved is a penny earned… plus interest.