Savings accounts are a great way to start growing your money. See how adding investments can grow your money even faster.
April is Youth Financial Literacy Month and to celebrate we’re sharing resources and activities you can use to help guide the children in your life. Below is a video to watch together, article to read, questions to discuss, and links to a related comic and activity sheet.
Investing Can Be Rewarding, But It’s Also Risky
A savings account is a great place to store your money at first. It’s safe and it pays a little interest. But it won’t make you rich! Growing your money requires that you move some of it into investments with a higher rate of return.
Many financial experts suggest that your money should be growing somewhere between 5% and 10% per year. You won’t get that from a savings account these days.
Just compare $100 in a savings account earning 1% interest per year with an investment earning 5% per year and another earning 10% per year.
At 1% interest, you’re earning just a few pennies per year. After 20 years, you’ve earned only $20. With a 5% return, you more than double your money to $271.85. And with a 10% return, your money grows more than seven times to $738.70!
However, investments aren’t insured like your savings account. You take the risk of losing everything if your investment becomes less valuable.
Questions To Discuss
- Would you rather know that your money is safe while it grows a little bit, or would you be OK with taking a risk while your money possibly grows a lot?
- Are you willing to put a portion of your savings away for a long time to watch it grow?
- Is there a company or product that you would like to invest your money in?