For a kid, money is magic. It comes from a machine, it lives in plastic cards, it buys toys. We ❤️ magic, but not when it comes to money. It’s time to solve some mysteries.
What IS money and how does it work?
Your 7-year-old should know that money works as an exchange. Money makes it easier to trade for the things they’d like to do or buy. It can be earned, spent, borrowed, given, saved, and invested.
If you plan to hold onto your $ for a while, it’s important to put it to work. $10 today is worth more than $10 tomorrow, because of inflation, yes, but *also* because of the MAGIC of compound interest. (Wait, money IS magic?? Mixed messages…)
Time = (actual) Money. Compound interest is as close to a money tree as your child will get without water or soil. 6% interest on their investment, year after year, means that each year, their principal and their interest are both making 6% interest. THEIR INTEREST IS MAKING INTEREST! 🤯 This is an important lesson about the power of patience… when it comes to money, invest wisely, leave it (mostly) alone to grow, and watch your kid’s savings speed up.
Your Wealthie account is a great place to watch compound interest in action. You can also use Wealthie’s compounding calculator to look ahead to see what your 7-year-old’s account may look like with 25 years of compounding to help it along.