“What are you going to do with that $20 birthday check from Grandma?”
“If you save it, I’ll give you 8% per year in parent-paid compound interest.”
“Nah, maybe next year Dad.”
Procrastinating on saving is always easy — especially when your kid has no idea how it could grow.
The next time that birthday check rolls in, whip up a little chart showing how much more valuable a check saved today is than ones saved successive years from now.
Here’s a chart for an 8 year old, a $20 birthday check, and a sweet 8% parent-paid interest rate courtesy of the Bank of Mom/Dad:
To create your own, just plug the relevant amounts into a compound interest calculator. Plug the birthday check amount into the Current Principal field, the number of years between now and the withdrawal date (maybe your kid’s projected high school or college graduation day) into the Years To Grow field, and your awesome Bank of Mom/Dad interest rate into the Interest Rate field.
Calculate the future value to see what saving the check now would be worth later. Then, rinse and repeat for successively fewer years of saving to see how delaying shrinks the final amount.
“Hey, looks like you could more than double your money by the end of high school if you save that check today.”
“Really? Wow. Maybe I will save it.”
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