Investing can lead to incredible benefits for high school students, including living wealthy and becoming rich.
“Investing early is beneficial because of compounding interest,” Dr. Fouad Moussa, a professor of finance at the Hampton University School of Business, said. “The earlier you start, the more time your money has to grow, as you earn interest on both the principal and the interest you’ve already earned.”
Compounding means the investor earns interest on the interest they have already earned. For example, saving one dollar for a year with a 10% interest rate results in one dollar and 10 cents. In the following year, interest is earned not just on the original dollar, but also on the dollar and ten cents. Compound interest has been shown as a beneficial way to grow money over time.
“A great website everyone in the United States should use is Investor.gov, which is provided by the U.S. Securities and Exchange Commission (SEC),” Moussa said.
The website has a helpful tool called the “Compound Interest Calculator,” which calculates how much compound interest an investor can make based on the initial investment, monthly contribution, length of time in years, estimated interest rate and compound frequency.
Using the compound interest calculator, anyone who starts with a zero initial investment and invests $10 a month for 50 years can expect to accumulate $390,583.40, assuming an average interest rate of 12%. Even with a small monthly contribution, significant gains can be achieved without the need to invest large amounts of money. The earlier investments are made, the greater the potential for growth, leading to increased savings.
Not only does leaving money invested for a longer period lead to greater returns, but slightly increasing monthly contributions can result in millions of dollars in the future. Starting to invest at an early age can enhance future financial freedom. This means possessing enough savings to handle unexpected events, like job loss, without stress. It’s about having the resources to cover rent or a mortgage and live comfortably without worrying about money.
In the United States, anyone can open a brokerage account. However, individuals under the age of 18 must open a custodial account, which is supervised by a parent or guardian.
“One piece of advice I have is to invest first, then think about spending what’s left. Prioritize investing, because every dollar you invest now will help you accumulate wealth in the future,” Moussa said. “However, every dollar you spend or waste now is a dollar you’ll regret not investing later.”
