Some might say that this is in the same ballpark as telling a bride to chill the day before her wedding or an expectant mother who’s water just broke to “just go with it” as she heads into labour and delivery. We are talking financial advice….for teenagers entering the work force.
No one likes to be told what to do with their money, particularly teenagers… however, in my case it was rather organic and it’s had a significant impact on my adult life.
Valuable financial advice can be a game changer and unlike weddings or childbirth, there’s math involved, real math. Compound interest math. Here’s my story…
(Here’s where you might want to bring in the teenager in your life. This is valuable intel, trust me.)
It was around 1982, my grandmother won the Lotto 649. Not “the jackpot” — Mormor won somewhere around $5K? She gave each of her grandchildren $1000. I think my cousin Tina bought a few fabulous pieces of clothing (she’s ridiculously stylish, always has been). My memory is blank on how her brother Mike spent his, but I guarantee it was fun! (Mike is exceptionally fun) It is with full, technicolour flashbacks that I remember my big brother, Greg, splurging on a really, really nice tennis racket.
Me? I froze.
Cue my fantastic step-dad, Bruce Edgar Bean, who gently took me aside and delivered my first real “life talk”. Not about boys, or booze, or sex, but about something far more important — if not extremely confusing to my young brain: compound interest.
I was just 14 so most of what Bruce said sailed over my head – all I really could do was nod as he explained, “you may not know what I mean now, but trust me, compound interest is your best friend. Put this money in an RRSP and commit to paying into it monthly. You take this advice and you will thank me in 30 years.”
Bruce being Bruce, he didn’t just leave it at simply putting the initial cash into the registered account – oh no – he was on me at every turn. My first ever “real” job at Dairy Queen he said: “OK, now, put $50 a month in” — “WHAT!?” (I did). Then I moved to Kentucky Fried Chicken (union job) “Ok, now it’s $150 a month” …. “what the WHAT!?” (I did) The bigger the job, the bigger the nut. Sometimes I was PISSED! Like my 20-something friends, my priority was fun – to SPEND my hard earned money, not put it in some vacuum…but I (thankfully) listened.
By the time I was making a solid salary, saving had become second nature. The easiest thing to do was to arrange for my monthly contributions to come straight out of my account, before I could even see it and feel the pain … it was simply gone — gone into my future. Genius.
Being smart with finances is not an “oh my gawd it’s March!” thing, nor is it something we all should start when we feel we’ve hit our job goals, the sooner you start (every little bit counts)….the bigger the number when compound interest kicks in!
It’s such simple math — it leaves us wondering why financial strategies such as saving like this isn’t taught in school. Wouldn’t a course on compound interest be more valuable in life than saaaaay algebra? (I never really grasped algebra)
If you are thinking “you’re rich, you can afford it” — Ohhhhh no no, think again. For years, and years, I made minimum wage ($3.00/hr) early in my RRSP life, and was pay-cheque-to-pay-cheque for decades. On more than one occasion there was only $10 a month to put away, and I did it. The monthly contributions make March far less painful/stressful. There were a few occasions where I couldn’t max out in March. When it felt right, I would take out a personal loan to do so – then immediately pay it back when my refund came from Revenue Canada. Also a key point is this: when you can’t max out, or comfortably get a loan to do it, you can save that RRSP contribution”room” to fill in the future! I know, that takes some of the stress of it away, doesn’t it?
If you are a teen or young adult the advice here is: start somewhere. As Bruce says, “never leave money on the table.” He’s right. (The only time you leave money on the table is a tip for great service.)
On March 23, 2016 I was laid off after 4 1/2 years at Breakfast Television, I worried about my future for no longer than .05 seconds — because my stepdad gave me the gift of financial security, in the form of great advice when I was 14. Thirty-six years of “maxing out”, let me tell you, I now understand compound interest.
I love my step dad, more than he knows, for giving me this gift – without giving me a penny.