Investing is a way to make money with your money. First, you have to earn money. As a kid, you get money from allowance, gifts, services, or from selling goods such as lemonade. Try to save some, if not all of this money. The next step is to make your money grow through investing. The chart below illustrates this process.
There are two main reasons why you should invest:
To stay ahead of inflation
Inflation causes the increase of prices. When a Big Mac goes up from $1.20 to $1.50 or when gas goes up from $1.30 to $1.70 a gallon, we say that is inflation. You need to make more money just to keep up with the rising cost of living.
Financial goals can be separated into two types:
Short-term goals - Things that you need or want now or within the year, such
as a bike, a computer, or a video game. Generally, it takes less money to reach these
The earlier you start investing, the sooner you can reach your financial goals. Investing is like "planting" money. A small amount of money invested will often grow to a larger sum over time. Youve heard the phrase, "Time is money." With investing, time also makes money.
Although investing can make money with money, the downside of investing is that there is a risk of losing your money.
The key to investing is to minimize the risk and to maximize the financial reward. For this reason, it is important to understand the many ways to invest money. Let us learn a few basic types of investments. If you want to learn more about financial goals, go to the Financial Goals Calculator. Also, let the experts tell us why the parents should teach kids to save. Click here