Wednesday, June 16, 2010

The “Real Cost” of That First New Car

Your son turns 16 and wants to buy a new car.

What might you tell him?

Suppose you showed him instead that he could save $150 per month by buying a good used car -- rather than a new one! Most new cars lose a lot of their value just after driving them off the lot anyways.

If he were to save the $150.00 per month savings in a Roth IRA for 5 years (from age 16 to 21) at 6% rate of interest he would accumulate $10,518.00!

At age 21 after the car is paid off he could just leave the $10,518.00 alone to compound for 44 years (until age 65).

If the investment was working at 10% over the 44 years he would have $841,222.00.

If it was working at 12% he would have $2,011,965.00 and it would all be Tax-Free!

Just think, this could be the prize at 65 for not buying a new car at age 16!

Money smart people understand “Compound Interest” and the “Time-Value” of money! Won't you join the club?

The Money Message:
  • “Delayed Gratification” is something most teenagers know little about because it is usually not practiced by their peers, or their parents.
  • In this example, one decision to delay a desired “Pleasure,” by only five years, could have a “Million Dollar plus” payback at retirement age.
  • Most of us older folks, if we think back to our teens and early twenties, probably wish we would have known about the “Time-Value” of money -- and had practiced more “Delayed Gratification” in some specific instances.
  • Don’t miss the opportunity to teach, and demonstrate, this powerful principle to your children.
I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any questions or comments, please feel free to contact me.
Post a Comment