I have a bone to pick with people who are always saying “start saving young” or “begin saving when your little”. Now it’s not that that it is wrong to tell people to begin saving when they are young, its just incomplete.
Saving vs. Investing is a Mindset
I’m all for teaching children to begin saving when their young but I think that we also need to emphasis begin investing when they are young too. My son, though he is only 1 and a half right now, is going to be taught that saving for the future can be short sighted if your not investing. Granted, saving $50 to go on a date in a few weeks is somewhat different that saving $50 per month for college, but we can begin to start thinking about this concept.
To Save $50 or to Invest $50
Take the saving $50 to go on a date example. What if I were to offer my son (who is now a teenager) a return on his money if he were to let me hold his money and use it while he were saving it? Let say I would offer him a 10% return on his money if he were to let me hold on to his money until he was ready to use it. I think this is a good way to begin to differentiate the difference between saving and investing at a young age.
Too Early to Invest??
While were at it, why not begin sooner? Is it ever to early to learn the lessons of investing? Let say, I give my son (who is now 8) a bi-weekly allowance. Let say I give him $10 every two weeks and he could do what ever he wanted to do with it. Matter of fact, I’ll offer to take him to the store and spend it on whatever he wants. But I’ll also make him a second offer. Since I’m Bank of Dad, I offer to hold his $10 and for every day that he lets me hold it, and not spend it, I’ll give him $1 extra per day (up to a week). First, I wish someone would offer me these rates! Second, I think it’s never too early to begin the first lesson of savings vs. investing.