Compounding Snowballs

Many grandparents are quick to send a check to their grandchildren as a present in hopes that they will use it responsibly, but recently I heard from two grandparents (and Early Bird readers) Barbara and Bob Baute and they have a next level idea. They have a combined total of nine grandchildren, with ages ranging from 12 to 20 years old. Their idea was plain and simple, give their grandchildren directions to follow (my book, Early Bird: The Power of Investing Young ), money to invest, and a contract to sign. They call it “The Investment Challenge”. On Christmas each grandchild received an envelope containing a contract for them to sign and a copy of Early Bird. The contract stated that they had to read Early Bird, and use the ideas in there to pick a stock to invest in. As long as they followed up and ran the analysis on the stocks, the grandparents would give them a certain amount of money every year for five years for investing purposes only. The deal was sealed when the grand...

The importance of saving is a concept many people struggle with, but the struggle of saving is more prevalent in teenagers of our society. About 57% of Americans have less than $1,000 in their savings accounts, with the average amount of money in a checking account being $4,436. Most teenagers don’t even have anywhere near that kind of money, but they have enough to visit the vending machine one to two times a day. This post is meant to open one’s eyes to the power of compounding. Let’s talk about my friend Ryan. Ryan visits the vending machine about once a day. With a range of snacks from a Coca-Cola to a Hershey chocolate bars with a low initial cost of $0.75 to $1.50, the vending machines are quite hard to resist. On an average day, Ryan will spend $2.25 on a bag of gummy bears ($1.25) and a Diet Snapple ($1.00). For a midday snack, it isn’t a bad price, but over time it can add up. If Ryan spent $2.25 everyday for two months of school days (40 days) it totals to $90.00. That ...