More DOLLAR$ AND $EN$E Blogs
- Til DEBT Do Us Part
- Bank On It
- Retirement Planning Starts Sooner Than You Thinků like NOW!
- Pay Yourself First
- Financial Storms
- A 'TAXING' TOPIC
- Free or Fee?
- Money Tips: Review Part Two
- Money Tips: Review Part One
- Is Money Important?
- Give Yourself Credit
- INVESTING - Make Money While You Sleep
- Hey Big Spender
- I'm not afraid of the Big Bad Money
- Need vs Want
- Shhh... Money Makes the World Go Around
- Quiz - What's your money style?
- Summer's here...NOW SHOW ME THE MONEY!
- Can Money Make You Happy?
- $AVE ME!
April 2008 Blogs
INVESTING - Make Money While You Sleep
DOLLAR$ and $EN$E, April 2008, by Brian Bogaert
While You Sleep!
So how can you ‘for real’ make money while you sleep? It’s called INVESTING.
You’ve probably heard of ‘interest’, right? Interest is something that is paid to you when you lend your money. A bank for instance will pay you interest on the money you leave in your account. You are actually lending your money to them in the sense that they use the money from all their bank clients to make more money on other ‘investments’. Don’t worry, your money is always there when you need it!
Without getting too complicated, imagine your brother was a bank. You need somewhere to put your money and he wants to make some investments. You give him $100 to take care of and he pays you an ‘interest rate’ of 2% every month (that’s WAY higher than any bank would give you, but it makes for easy math!). So every month that he holds onto your $100, he has to pay you an extra $2 (2% of $100 = $2).
Here’s the thing... while he’s taking care of your $100, he’s actually ‘investing’ it to make his own interest (otherwise known as cash flow or passive income). He has found someone like himself who will pay him 10% instead of the 2% he’s giving you. So while you’re happy because you’re making money, he is doing the same and making even more.
Can I do it?
We know you’re not a bank, so then how can a kid make ‘passive income’? The good news is there are lots of ways! First, practice by saving... don’t spend all your allowance on things you don’t really care about. Then when you save some, put it into an account and don’t touch it.
In the past we’ve talked about ways you can make money such as: work at a job, invent or discover something, sell stuff, own your own business, and investing. A bank account is one way to make interest, but it won’t be much. Keep in mind that by the time they deduct account fees, the interest you made will be close to gone or gone. A better idea is to buy GICs or Bonds where they pay you a higher rate. An EVEN better way is to start learning about different kinds of investing (like real estate or stocks) so that it will be easy for you to start when you have saved up your pennies and finished high school. But let’s just take none step at a time. It may all sound overwhelming but ANYONE can do it and make their money work for them.
There are people who invest very LARGE amounts of money at high interest rates for longer periods of time and they make LOTS of money doing it. You can too.
Invest and leave it there.
The really cool thing about investing is that after you do it, in some cases, there is no further work to be done yet your money just quietly and happily keeps on making you more money. That is how your money works for you. It makes you interest while you sleep, eat, spend time with friends or even go shopping (and wouldn’t THAT be nice?!).
Here’s a cool concept to give you an idea... it’s something called ‘compound interest’ and it is a very powerful concept indeed, so read carefully! Compound interest is when you add the interest you get every year to the original amount you put in, and then add interest on that new amount. Here’s an example:
Say when you’re 18 you decide to give up your afternoon pop and chocolate bar snack. Let’s say that saves you $4.00 a day. This is really cool... now if you put that $4 a day into a savings account that gives you a 2% annual interest rate - and you leave it alone until the age of 67 - how much money do you think you’ll have? Just so you know, $4 a day from the age of 18 to the age of 67 is $71,540. That’s the part you will have accumulated from your $4 a day. With ‘compound interest’ after all those years, your $71,540 will in fact be a total of $319,159! That means you made $247,619 in interest! WooHoo!! How cool is that? And all you had to do was make your deposits.
Don’t wait, start now!
Most of you are under 18. If you get an early start, the numbers are WAY better!
Investing is a fantastic way to become financially free and never have to worry about money. It’s a huge topic that we barely got into, but I encourage you to learn more... it’s worth the investment!
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Brian Bogaert, DOLLAR$ and $EN$E, bank account, investing, allowance, bank, make money while you sleep, practice saving, cash flow, interest, passive income, own your own business, real estate, stocks, high interest rates, your money works for you, compound interest, savings account, annual interest, start now, financially free