Compound interest only works when the interest paid exceeds inflation. Your money is simply rotting otherwise and would be better invested in something that's appreciating at a more rapid rate. Maybe that's wine or stocks or a house.
Your parent's generation had savings accounts that paid actual interest. Today you get a token 0.25% on a good day. With the prime rate being so low there's not much to be made by leaving your money sitting around.
As much as it's important to save money, it's also important to not save too much. Living a life of frugality in the hope of having a happy future is the deferred life plan and for many it never pans out.
Spend what you need to have an enjoyable life now and if you can save, by all means. Life within your means and spend wisely, but don't be such a cheapskate in the hopes that your accumulated pennies will somehow make you a billionaire some day.
Agreed. I only pointed out compound interest as an example of the kinds of tools that kids aren't really taught about (well, I wasn't, at least).
The thing is, I did actually pick up a book on stock investing as a teen... one more of my "library book sale" pick ups, but I skimmed through it, but the value of investing and taking advantage of the capital markets didn't "click" for me back then. Also, considering this was in the 80's, far before there was E-Trade or Sharebuilder or anything of that nature, the markets didn't seem very accessible to a poor kid growing up in rural NC.
At least that's one advantage we have today... something like Sharebuilder is a nice way to dip your toes in the water.
For better or for worse, we're in the era of "DIY" investments. You can't just dump your cash in a bank account, mutual funds, or write a cheque to your broker and expect to make money like was done in years gone by.
Now you need to be educated. You need to know the tools at your disposal and how best to make use of them.
My advice to anyone looking to invest is to first read up on gambling. Any book worth reading spends a good chunk of time explaining one thing over and over: bankroll management. For investment this is the same idea. Don't over-commit.
I'd also advocate reading on gambling scams as there's far too many dodgy investments out there promising impossible returns or companies with a "business plan" that's so full of holes it whistles when it moves.
Perhaps people who grew up in an environment filled with mistrust and the constant risk of thievery would be better prepared for investing in the stock market than most.
Your parent's generation had savings accounts that paid actual interest. Today you get a token 0.25% on a good day. With the prime rate being so low there's not much to be made by leaving your money sitting around.
As much as it's important to save money, it's also important to not save too much. Living a life of frugality in the hope of having a happy future is the deferred life plan and for many it never pans out.
Spend what you need to have an enjoyable life now and if you can save, by all means. Life within your means and spend wisely, but don't be such a cheapskate in the hopes that your accumulated pennies will somehow make you a billionaire some day.