Kids, Save your money now!

When I was young, my mom, aunt and uncle always tells me and my siblings to save some of our allowances.  As a young and naughty kid, I always tell myself that my mom just says that because she wanted to borrow my money if I have saved a lot.  So, the selfish me spend everything that I received from my daily allowance.

Before you react and say that I was a bad little girl, let me tell you that as early as 6 years old I am already commuting to school.  My mom who was busy working just gave me an exact amount of money for my transportation fare and snacks. Imagine a poor young girl who have just the exact money and yet the people around her expects her to save up.  Impossible right? (Well, that is just me making excuses hehe)

When I got a job, besides giving some of my salary to my mom for our house improvement and house expenses, I spent most of my salary to the things that I did not have when I was young.  No, I didn’t buy toys such as Barbies (they are not appealing to me), but instead I bought clothes, shoes, bags and to dine at various restaurants.

My reason was that I am earning a lot and I think I deserve to treat myself.  Saving up was not on my to do list.

Now that I am a mom, I regret not having a saving account when I was young.  I regret the time that I have wasted for not educating myself about the importance of savings and having something for emergency purposes.

Now, I am the one who is telling my nieces and nephews to save up as early as now.

Time is crucial in savings especially if you will invest your money in stock market and mutual funds.  The early you start the bigger your money will gain as times goes by.

This is what I learned from co-blogger Fitz Villafuerte (this illustration was taken from his blog: Ready to be Rich)

According to him “it’s always better to invest as early as you can in your life”.

To give you a simple illustration why, here’s a couple of scenarios that I came up with.

Scenario 1:

• Juan sets aside P1,000 a month and puts it in an investment that earns 10% per annum.
• After 5 years, Pedro begins investing P2,000 a month under the same instrument.

At the end of 10 years, here’s what will happen:

You’ll see that by year 10, both Juan and Pedro have already invested the same amount, but the gross value of Juan’s investment is more than that of Pedro’s.

Here’s another and more convincing example why you should invest early.

Scenario 2:

• Maria invests P1,000 a month in an instrument that earns 10% per annum. She stops after 4 years.
• At that point, Rosa begins investing P1,000 a month on the same investment and continues to do it for the next 6 years.

These are the gross value of their investments after 10 years:

Despite the fact that Rosa invested more money, Maria still has a larger investment value than her. And think how much more Maria would have if she didn’t stop investing.

I hope that young kids and teens who have extra allowance will learn from my mistake and start saving or investing as early as possible.

Imagine if you will just save at least P100/week for 52 weeks, you will have P5,200 at the end of the year that you can use to invest in Mutual Funds and/or Stock Market for the following year.

I hope that my nieces and nephews will listen to me and that they will do what I FAILED to do when I was their age.