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There, if you put in $1,000, at the end of the year you have $1,050, at 5 percent interest. The next year you get 5 percent on the entire $1,050, not just the grand you initially put in. Your money is making more money for you.
If an 11 year old puts in $2,000 in the stock market and never takes it out until he’s 65, it’ll be worth over $1 million if he can average a 12 percent return. Our 9-year-old son has a mutual fund that was started with money he received as gifts a few years ago. His fund has grown with dividends reinvested and is up about 35 percent this year.
Will it be up 35 percent every year? No. There may even be years when it is down.
But we know that over the long haul, his portfolio will increase and when he comes of age, he will be able to pay for grad school or start a business or put a down payment on his first house. That feels good, and that’s what investing can do for everybody.
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