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The Rule of 72

The Rule of 72 is an equation that determines how long it will take to double your investment.

The rule states that:

72 / % annual interest rate = number of years for your money to double

Therefore, with a 7% return, every ten years your money will double.

72 / 7 = 10

 

If you retired at age 60, with a $2 million portfolio, given another ten years, you could have hypothetically ended up with a $4 million portfolio.

Can you imagine how amazing you would feel with an extra $2 million in retirement? I’m sure it would do you a lot of good.

 

So how can you add an extra ten years to your investment:

1.     You could push your retirement to age 70, but who wants to work during their golden years?

2.     You could cryogenically freeze yourself for ten years, letting the investment grow, but then you’d miss ten years with your loved ones.

3.     Maybe time travel? But who knows if the technology will ever be invented.

Actually, the solution to getting an extra ten years is simple: start saving and investing at an earlier age.

Saving early is one of the best ways to end up with more money during retirement. Not only should youth start saving earlier, but they should also start investing earlier.

 

Why youth need to start saving and investing earlier

According to the Blackrock Global Investor Pulse Survey, the average age Canadians start investing is 31 and Canadians hold 60% of their portfolio in Cash.

This is understandable - investing can be complex and people are scared of losing their hard-earned money in the stock market.

So how do we get youth investing for the future at age 21 -: 10 years earlier than average?

As great as that would be, age 11 is actually the ideal age to start saving and investing.

The first time I started saving was when I got my first job after graduating from university. I was diligent enough to put away a significant amount of money before I immigrated to Canada. But before I had a full-time job, I didn’t even consider saving money.

I had summer jobs and an allowance, yet all my money was spent on clothes, food and entertainment. The thought of saving never even crossed my mind.

In my teens I didn’t know how to invest, and I didn’t understand the way compound interest worked. Frankly even at age 25, saving for retirement seemed like an extremely foreign concept. I knew I needed to save money, but it wasn’t a priority.

I suppose you already know what I am going to say: young people need more financial literacy.

 

Teaching youth about financial literacy

At some point your child is going to choose a career, and they will become an expert in this field. This will be the most practical information they need to support themselves.

Of course this job-specific knowledge is important, but financial literacy is equally as important, and it will be used forever. Every student in every field will need these skills.

Beyond the above-stated benefits, there are even more benefits to financial literacy:

 

●      At risk youth: Youth can be drawn to any way of making money, including illicit ways. Instead, offer them programs that will engage and reach them. Let them focus on an evening or summer job, and invest that money wisely for the future. Show them they will be able to achieve financial success down the line, with some patience.

●      College enrollment: Not everyone is fortunate enough to have their parents pay for their education. For those less privileged, give them an upper hand when it comes to getting a college education. Teach them how to invest and grow their money and how to manage debt, so that they have more money for college and are more comfortable with taking on loans.

●      Mental health: The world is big and complex for a child, and there is consistent pressure to succeed. The less complex you can make it, then the less overwhelming it is for them. And the more hope you give them for the future, the stronger their mental health will be.

 

Making financial literacy engaging for students

Children may show interest in learning about personal finance, but more often than not, the reality is that RRSPs, Taxes & Life Insurance are boring.

Therefore, educators need to make lessons engaging, or else they will be forgotten. As we all know attention spans are short and youth and people in general have many competing interests.

Youth need programs that are entertaining, as well as easy to understand. If the information goes in one ear and out the other, then it won’t be effective.

Give youth a memorable class that will also provide a deep understanding of complex concepts. They need to leave that class saying, ‘that was amazing!’

Any financial literacy is good, but I am advocating for engaging financial literacy for students.

This will provide immeasurable benefits for both the child themselves, and the economy:

●      Promoting increased higher education and college enrollment

●      Enhanced mental health

●      And it could very well lead to your future students gaining an extra ten years of savings, which could double their retirement portfolio!

 

Valista Education