It’s choice – not chance – that determines your destiny.

– Jean Nidetch –

Welcome! You’re reading the first blog of YoungSmartWealthy (YSW). You’re probably asking what is YoungSmartWealthy? Well it’s a blog about becoming smart financially while you’re young, so you become wealthy when you’re older.

Personally, when I was young, I was neither smart nor wealthy. My parents divorced when I was five and I was raised by a single mom and my two older sisters. And like many single parent homes, life was not easy and there was not a lot of extra money around our home.

But what I did have were a lot of smart people around me when I was a teenager, whether they were family, friends, parents, teachers or coaches. And not only were they smart but they were also kind and generous to me, which I never forgot. And they gave me some great advice which I acted on as I got older.

And now that I’m older, I want to pay it forward and help young people be smart financially and ultimately wealthy when they’re older. Because the reality is, that life is easier when you’re financially secure. And you can enjoy all the great things life offers like travel, helping others, starting your own company, owning your own home or being able to take a break when you want, as you have a nest egg that allows you to do what you want, when you want.

Making Your Money Work

A key factor in becoming wealthy is taking your money and putting it to work for you as soon as possible. What does that mean? And why would I want to start saving money now? And I don’t have any money that I can save!

Well, let me tell you why you should do this and why it matters that you start now!

As a young person have a critical advantage over others, you’re young! The money you save and invest now, will grow exponentially if you just let your money work for you.
You don’t need a lot of money to start! Even $10 a month you set aside can help build wealth for you! Just start. Put all of your spare change in a jar and see how much you have at the end of each month.
What do I mean by letting your money work for you? It’s simple, save some of the money you get through birthday gifts, part-time jobs etc. and then invest it. And then take the returns you get on your saved money each year and then invest those returns too.

What is Compound Interest?

Just leave your money and your returns alone, and continue investing. And keep repeating this process year over year. This is called the power of compound interest. Albert Einstein called compound interest “the 8th wonder of the world.” The reason is compound interest and savings over time can take a small amount of money and turn it in to a significant amount of wealth.

How? Let me give you an example. Let’s start with an amount of say $50 per month. If you have a part-time job and/or have a summer job you may be able to save a lot more than $50 per month. But to keep things simple let’s start with this amount. How much do you think $50 per month saved and invested over 5 years adds up to?

It adds up to over $3400! So even though you only contributed $3000 of your own money over 5 years, with a conservative return of 5%, you earned over $400 in “free money” just due to your investment returns.

Let’s say you’re able to save $100 per month but now over 10 years. What’s the amount using again a compounding return of 5%? Well, now it’s well over $15,000! And now you’ve earned over $3000 in “free money” just due to saving more, a longer time period and the power of compound interest.

Imagine once you graduate from college and you’re on a salary of let’s say $50,000 per year and you’re a good saver, saving 10% of your pre-tax income, so $5000 per year. Which works out to approximately $400 per month and you started saving at 22 right after college for 25 years. By the age of 47 you’d have almost $240,000 in your bank account (including close to $20,000 in free money).

Go on-line now and find an on-line calculator and run your own calculations. Run the numbers for earning $100,000 per year, saving 10% and investing for 30 years. The amount in your bank account would be over $660,000!

Do you now see how great it is to start saving and investing while you’re young? Even if it’s $20 per month, you’ll see the exponential power of time, returns and money saved. It will blow you away how much money you can save, if you start saving as soon and as much as possible.

Yes, I realize college will make a dent into your savings but the great news is the more you’ve saved before college, the less debt you’ll have when you leave college. And the faster you can start investing again after college, versus paying off debt. And with a college degree your income will likely be much higher than a person without a college degree, so you can save and invest even more.

They’ll be more of this to come in future blogs. But knowing something and acting on it are two different things. So, if you haven’t already got a bank account set up, set one up asap on-line or in a bank branch and start putting money into that account at the end of every month. Then talk to someone you trust, your bank or research on-line how you want to invest that money. So, you too will become YoungSmartWealthy!

Share your stories with me on Twitter @LiveYSW of how you are saving and investing your money! Five respondents will get a $20 Amazon gift card!