National problem

anyone who is a parent has the obligation to give basic financial education to there children. The public school systems in most states don't even touch on it. The difference between educating young adults about money and retirement is a million dollar conversation. Don't expect schools to cover this and give it a shot to try and open eyes to the difference a financial education can make. Let me know if I'm totally off base.

 

The difference in 18 to 25 is only seven years. But seven years of compound interest is almost too much of interest to ever catch up. Just curious if I'm the only one seeing an issue with this.

 

Can you elaborate?

 

Its really sad. We have guys at my unit that are in their early 20's who still don't even have credit cards, never have taken out a loan, nothing. I really can't believe that school doesn't teach kids how to manage a bank account, access credit, how to apply for a loan, and then responsibly pay all that stuff off.

 

Great post. A large goal in parenting to me is teaching the kid to be independent which seems to run contrary to the current tide.

 

Absolutely. If you run a compound interest calculator at 7% a kid who saves 200 a month til 25 and stops ends up with more money in the bank then an adult who starts saving the same at 25 but keeps putting money in the account until 65. 7 years of deposits versus 40 years.

 

I am 20 and work part time. I put 5% into my 401k weekly. I plan to retire one day

 

This is in my opinion is a pretty big issue that does not get enough air time. I grew up in a middle class house and went to a public school that bussed in the low income neighborhoods. Little to no time was ever given to saving money and the effects of retirement planning. The thing that struck me as I became older was realizing that info would have been extremely helpful to learn at an earlier age especially to the ones that came from lower income families. It may have helped to reverse their fortunes as they began to get older and work.

 

Its frustrating that young adults graduating high school don't know what a Roth IRA is yet know the capitals in another country.

 

Shamelessly stolen from aonther site, not checked for accuracy but, reflects the "rule of 72" well...it's not far off.

First is the rate of return, second is the number of years to double your $.


0.25% 277.605
0.5% 138.976
1% 69.661
2% 35.003
3% 23.450
4% 17.673
5% 14.207
6% 11.896
7% 10.245
8% 9.006
9% 8.043
10% 7.273
11% 6.642
12% 6.116
15% 4.959
18% 4.188
20% 3.802
25% 3.106
30% 2.642
40% 2.060
50% 1.710
60% 1.475
70% 1.306

 

Ah gotcha.

 

http://www.businessinsider.com/compound-interest-retirement-funds-2014-3 They start saving at 25 on this chart but imagine the difference just 7 years make

 

http://www.businessinsider.com/compound-interest-monthly-investment-2014-3/#.U6xcEI1dWVh Another better example

 

In case anyone is interested, I made a spreadsheet where you can play around with your contribution numbers.

https://docs.google.com/spreadsheets/d/10vztCtyyfu6SbIVFvvgch3dKxJiQ2MwylA4Y6gvyrZ0/edit?usp=sharing

I use this to illustrate to family the power of saving and compounding interest in an IRA/401k. One of my friends is 30 and I finally got her to start contributing. The difference in saving $100 vs $150 can be pretty staggering. It's also fun to play with the numbers and see how small changes can affect your final return. Feel free to copy or let me know if I can add more details.

::EDIT:: Changed the link so it will work now. You'll need to copy/paste into your own sheet to use.

 

Ziggy thank you for making a difference

 

One thing I found lacking in my highschool education was basic financial planning. Sure we could write essays, solve complex calculus problems, and make a PowerPoint presentation, but when it came to something like how to save for retirement, understanding loans, mortgages, ya know... Stuff that adults have to deal with everyday for the rest of their lives. I think there should be a class of some sort to teach basic financial competency.

 

A class on basic financial skills should be a perquisite to any high school economics course. It seems ridiculous to me to teach kids about Marx and Adam Smith when they don't know how to fill out a tax withholding form. Which information affects your daily life more as a young adult?