Dinner with my nieces

Ok, they are not really my nieces, but in many ways they are.

I was married once with my business partner Cheryl. After a few years, things didn’t work out and we got divorced, but we continued being good friends and up to this date, we still work together.

I was always invited to her family gatherings and after the divorce, that didn’t change. We had a nonverbal understanding that just because we were divorced, I didn’t have to divorce her family.

As an immigrant in Canada, calling someone “family” is of great value. Thanks to my adopted family I never feel lonely. I feel that I can always count on the support and love of this fantastic group of people who I call family.

My nieces

Cheryl has two wonderful nieces who I have seen growing up for the past 12 years. Luna is 24 and Kali is 17. Both of them are super smart, sensitive, generous, and fun to be with.

The Dinner

I have been blogging about money for many years and now that Luna has finished her university education and starting out on her own, I thought this would be a great opportunity to speak about a financial plan. At the same time, it will be an early start for Kali.

Luna and Kali are wealthy beyond belief

Let’s play a macabre science fiction game for a second.

Many people know Warren Buffett. He is a multibillionaire (84 billion) who is also 87 years old.

If Warren Buffett could change all his billions of dollars for the opportunity to be Luna’s age, he would sign the contract in a second. He can always make his billions again, but he will never again be young.

On the other hand, if someone proposed to Luna or Kali to have 84 billion dollars in exchange for their youth, they would not do it.

In short, Luna and Kali have something of tremendous value, more valuable than all of Warren Buffett’s billions, they have their youth.

How to use youth when thinking of investments

As a money blogger, I write to hundreds of people, about how to save more, earn more and invest the difference. I know that my writing helps some people. I have been told so more than once. But today, my goal is more specific. I want to share with my niece some ideas that may help them in the future.

Let’s create a fictitious scenario

With this example, I want to highlight the importance of investing as early as possible.

Let’s imagine a time frame of 45 years. Most people work from age 20 to age 65. Let’s also imagine that we can get a rate of return of 8%. This has been the average rate of return of the stock market for the past 100 years.

Let’s see what happens if Luna and Kali have different saving strategies.

Luna:

Luna decides to put her savings plan into practice today. She decides to save $5,000 per year and put it in her TFSA (Tax-Free Savings Account). She contributes to her TFSA for 10 years. At the end of the 10 years, she has saved $50,000. She stops and doesn’t save anymore.

Kali:

Kali decides not to start saving right away. She wants to study for a master degree and then a Ph.D. Once she gets a good job, she will start saving. Kali stars saving 10 years later, she becomes very serious about saving and she puts $5,000 in her TFSA every year for the next 35 years. In total, Kali saves $175,000.

At the end of a 45 year period, who will have more money?

Once Again, Luna saved $50,000

Kali saved $175,000 but started 10 years later.

Assuming a rate of return of 8%,

Luna will have $1,156,613

And Kali will have $930,510.

Conclusion

This example shows the importance of time. My number one piece of advice to young people is to start saving as early as possible. In this fictitious example, because Luna had a 10 years early start, she was able to accumulate more money.

If someone would have taught me this lesson when I was 24 years old, and if I would have listened, I would be in a much better financial position today.

I am looking forward to dinner with my nieces. 🙂

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