We were asked, "If my child saves $500 per year starting when she's 18, can she turn it into a million dollars in her lifetime? I want to explain to her how money can grow."
The answer? Well, it all depends on what she does with the money. If she stuffs it into her mattress, she'll be 2,018 years old before it turns into 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 annum, she'll be a 112-year-old millionaire. But, with an S&P 500 index fund, which has matched the stock market's average 10% return, she'll have seven figures in her 70s.
Keep in mind, though, that if she takes the time to learn more about investing, she may able to beat the stock market and hit the million-dollar mark a lot sooner. If she gets really good at evaluating and selecting companies in which to invest and earns a whopping annual average of 20%, she could be a millionaire by age 50. And, this assumes she won't save more than $500 a year -- which, of course, she will, right?
Here are some average annual growth rates of familiar companies over the past 10 years -- just to show you how well you might do, if you invest in the right companies:
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.