Where You Put Your Money Does Matter

According to Dave Ramsey (www.daveramsey.com), "A Simple one-time investment of $1000 could make a huge difference at retirement...if you know how and where to invest it.

Did you know that 84% of teens have some money saved, with the average being $1044. (I remember being in this position once as a high school student, working & saving. Boy, do I wish someone had shared this with me at that time! $1000 was worth more in 1982 than today!)

Dave Ramsey has a simple chart with some interesting facts.
http://www.daveramsey.com/school/media/pdf/sample_chapter.pdf (Page 9)

He points out on his chart that he learned from a Charles Schwab survey that 81% of teens say that it is important to have a lot of money in their lives. However only 22% say they know how to invest money to make it grow. And only 24% believe that since they are you, saving money now is not that important.

The chart shows what can happen to $1000 over a 40 year period (Age 25 -65) at different rates of return 6%, 12%, and 18% (with no new money added). Because of the compounding effect of interest, a snowball effect is created.

At 6%, $1000 will grow to $10,285 in 40 years.
At 12%, $1000 will grow to $93,050 in 40 years.
At 18%, $1000 will grow to $750,378 in 40 years.

There are some well-established mutual funds which have averaged 12%per year over a 40 year or longer time period. That does NOT mean that the fund will perform at 12% every year. 12% is merely an average.

As Dave often reminds us, saving & building wealth requires discipline and it is a marathon, not a sprint. Plant the seed and let it grow.

Are there any funds which average 18%? None that I can think of which have consistently perform at that level long term - However, think of your credit card lenders, and other forms of revolving credit. Can you see how they make money?

Remember the compound snowball is either working FOR you or AGAINST you. With all of the recent news about credit card lenders gouging, http://njmg.typepad.com/moneyblog/2009/05/credit-card-gouging.html
isn't this a great time to cut up the cards and begin to take control of your finances again?

Do you know a teen who has saved some money?

For more information, please contact me at www.deanvoelker.com.