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Savings and Investing

2024.10.14

Photo Credit: Maitree Rimthong @pexels.com

 

Savings and Investing

 

Children often learn their money skills from their parents. For example, parents often tell their children to make a habit of saving money.

 

The problem is that many parents have very poor money management skills. Studies show that in America more than 25% of people have less than $1000 savings.

 

This situation is obviously stressful for the individual, as any job loss would spell disaster. The individual is locked into a job that they may not like, and they, and their family, are in a financially precarious situation.

 

The importance of saving and investing, and teaching these skills to our children, cannot be overemphasized. The power of compounding interest shows that a person who invests $10,000 at the age of 20 and leaves it in an ETF paying 7% would have over $210,000 if they retire at the age of 65 (and almost $300,000 if they retire at 70!!) with no additions!

 

Do you save? Do you have a part time job?

 

What are your financial goals for your 20s? For your 30s?

 

What age would you like to retire?

 

What does financial stability mean to you? How much money do you need to reach financial independence?

 

Recently, the idea of financial independence and even early retirement has taken hold in American and many western countries. What financial independence means to one person will, of course, be different from another person. One person can live a simple life surfing and playing guitar in a small beach town, and live very frugally. Another person may wish for boats and sports cars.

 

Neither preference is better or worse than the other. The important point is, however, to be true to yourself, and know what will make you satisfied with your own life.

 

How much do you need to retire (or become financially independent)? The question is not one of values, but a simple mathematical equation. When your income from passive investments (or “passive income flow”) exceeds your outgoing expenses, you have reached a position of financial independence.

 

The art of learning to save money (and learning to invest our savings) is a skill fundamental to our daily life. Unfortunately, this skill is very poorly taught at schools. The necessity for schools (and parents) to instill the mental requirements for saving and investing in children has many additional positive effects.

 

Questions:

 

Q1. What percentage of US citizens have less than $1000 in savings?

 

Q2. Who teaches kids about money?

 

Q2. What is the main problem when parents teach their kids about money?

 

Scroll down ↓ for the answers

 



















A1. Over 25%

A2. The parents

A3. The parents are poor money managers, so they do not know how to teach good habits.

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