Help Your Kids By Teaching Them About Compounding Early
In elementary school, my teacher told us the story where a king agrees to reward someone by placing one grain of rice on the first square of a chessboard, two on the second, four on the third, and so on (doubling the amount on each square). By the end of the chessboard, the amount of rice would have been enough to cover the entire kingdom. This simple story really stuck with me in teaching me about how patience and consistency can result in exponential growth.
Get Your Money to Work Harder Than You
Compounding is the process where your money grows exponentially over time. Think of it like every dollar you invest going to work finding more dollars. Use this calculator to see exactly when your investment returns might exceed your salary: a powerful way to show your kids how money can work harder than they do with enough time.
Your Money Starts Working Harder Than You in Year 35
Annual Salary
$140,693
Investment Returns
$143,616
Customize Your Scenario
Three Ways to Explain Compounding to Your Kids
Time: Your Most Valuable Asset
Time is the one resource that's constantly depleting, but it's also your greatest ally in compounding. The earlier you start, the more time your "snowball" has to grow. This applies to everything from saving money to learning a new skill.
- Show them how a small weekly allowance can grow over many years
- Compare starting at age 8 vs age 18 with the same amount
- Use the calculator above to demonstrate the power of time
Making It Real for Kids
The rice and chessboard story is powerful because it's visual and tangible. Here are some practical ways to make compounding real for your kids:
- Start with physical objects (like rice) to demonstrate doubling
- Use the interactive calculator above to show them how their allowance or birthday money could grow
- Connect it to things they're already doing like practicing a sport or instrument where small improvements compound over time
- Share your own investment journey and when you first learned about compounding
The Takeaway
Time in the market beats timing the market. The earlier your kids understand this principle, the more time they'll have to let compounding work its magic: whether that's with money, skills, or opportunities.
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