Teach Your Students the Value of Money – Compound Interest

How much money does it take to save a million in your lifetime? The younger you are the less it takes due to compound interest. Your students have a great chance to save a large sum if they begin saving early. Unfortunately most people don’t realize this concept until many years have passed by. A couple of charts have recently been published which show this concept in detail.

David Bach who wrote the book “Smart Couples Finish Rich” created a chart which shows how much anyone can save by putting a little away each day and earning 12% interest per year. Here is a link to the chart: Building a Million Dollar Retirement Account

It shows that saving $2 a day starting at age 20 will end up with $1 Million at age 65, starting at 25 they will need to save $3.57 a day and at 30 they will need to save only $6.35 per day. If you wait until later in life though the sums become much larger. The only problem I have with his chart/analysis is that in today’s world earning 12% a year is no easy task.

Fortunately, Andy Kiersz of Business Insider created his own chart which shows what a person would need to save and earn 3%, 5% or 7% returns which are much more realistic. At a 7% return a 20 year old would only have to save $9 a day to reach the $1 million dollar goal at 65. Here is a link to the article with his chart: Million Dollar Retirement Chart #2

Now that is a lesson worth teaching your students!