We were asked, "If my child saves $500 per year starting when she's 18, can she turn it into $1 million in her lifetime? I want to explain to her how money can grow."
The answer depends on what she does with the money. If she stuffs it into her mattress, she'll be 2,018 years old when it becomes a million intergalactic globodollars. (Unfortunately, she might not be around to enjoy it.) If she parks it in a bank and is lucky enough to earn an average of 4% per year, she'll be a 112-year-old millionaire. But with an S&P 500 index fund, which has matched the stock market's average 11% return, she'll have seven figures around age 71.
Keep in mind, though, that she may able to beat the stock market and hit a million a lot sooner if she takes the time to learn more about investing. If she gets really good at evaluating and selecting companies in which to invest, and she earns a whopping annual average of 20% or so, she'd be a millionaire by age 50. And this assumes she won't save more than $500 a year -- which, of course, she will, right?
By investing intelligently, anyone can get to a million in a lifetime -- starting with just a few hundred bucks. And no matter your age, there's no better time to start than now.
To get your kids interested in saving and investing their money (and perhaps to ensure that you'll be treated to a first-class nursing home one day), have them drop by our newly overhauled and revised corner of Fooldom for teens. Also, consider giving them a copy of our book, The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of.
