Getting Rich: Kids, Start Getting Rich

Kids, Start Getting Rich

For anyone who lives with their parent(s), it’s time to take advantage of the situation for both your good and the good of your parents once you’re taking care of them. All too often, I talk to people still living at home (some in their 20’s) and I envy them. I think to myself: had I known earlier what I should be doing, I would be even richer than I am today. Think about it, if you start saving $25/mo at age 13 in your savings account, by 18 you’re going to have about $1500 (pre-interest). And that’s if you don’t get a job first!

Now, for the kid who gets a job at 16 and saves even a quarter of his paycheck, he is already preparing himself to be a wealthy man. Let’s say Jimmy makes $6.75/hour (California minimum wage) and works 20 hours per week. Now let’s say he keeps about 80% of that after the government takes its slice. Jimmy keeps about $432.00 and wisely decides to save half in his bank account. Each month for a year, Jimmy saves $216.00 in his bank account and soon he’s saved $2600 with interest. Not to mention, since Jimmy is such an excellent worker and hasn’t missed a day in a year, he gets a 50 cent raise and now earns $7.25/hour. For another year, Jimmy works 20 hours per week and saves half his paycheck. At the end of that year, Jimmy now has about $6100.00 in savings and could still afford to buy himself food, gas and clothing.

Wow, $6000.00 and only 18 years old. Even if this were only $5000.00, you’d probably still be impressed with Jimmy’s savings. Imagine if he had saved 75% or even 100% of that. My point here is to take advantage of living rent-free while you can, especially if you stay after high school.

The Richest Man In Babylon

Before continuing, I’d like to urge you to read this free eBook: The Richest Man In Babylon (eBook) by George Clason. In the book, Clason gives several very important lessons in the forms of parables. One of the most important of the lessons is to have your gold (money) work for you like a slave, and that’s what we’ll talk about next.

Make Your Money Work For You
Money is the best kind of worker; it doesn’t require food, sleep or bathroom breaks. It will work non-stop, 24 hours a day, 7 days a week, 52 weeks a year. The trick is getting it to earn more as it does work. This can be done in a number of ways:

Interest on savings
Earnings on stocks
Profits from a business
Many more…

Let’s talk about interest on savings, the most basic way to get your money to work for you. It’s very easy to understand: you put $10,000.00 in the bank and the bank gives you a 2% interest rate on your money, you earn ~$200.00 in interest. While you were sleeping, your money was making you a nice $16.67/month just for placing it in the bank. You can imagine having $100,000.00 in the bank and getting $2000.00 in interest or even $1,000,000.00 and getting $20,0000.00 in interest. Not to mention, that’s only at a 2% interest rate. Banks like INGDirect and HSBC offer accounts with 4-5% interest.

That is power. All you do is put your money in and let it grow. If you need $40,000.00/year to live comfortably and you have $1,000,000.00 in your HSBC account earning 5%, you can take out $40,000.00 that year to live on and leave $10,000.00 in there to grow. It really is a beautiful thing.

The same goes for stocks, only stocks are a fair bit riskier as they have the power to quickly lose value. On the other side of the same token, they also have the power to gain value extremely fast. Just think about all those people who invested in companies like McDonalds or Microsoft. They were either extremely lucky or paying close attention. In either situation, they were prepared to take that risk and it paid off for them, immensely.

I am friends with a couple who invested in McDonalds before its boom some time ago. They are now multi-multi-millionaires and do not need to worry about money. Talk about having your money work for you!

Now if you own a successful business (doesn’t fail within 5 years) and it grows at all, you are now earning money and it is working for you. Don’t confuse owning a business with running a business; I am speaking strictly of owning a business someone else runs. It’s a beautiful thing. This can be anything from a furniture store to renting out apartments and receiving money. I’ll leave that part up to you.

Surround Yourself With Rock Stars

Laugh all you want but I’m dead serious. I don’t mean rock stars as in just people who play fantastic music for a living. When I use the term ‘Rock Star,’ I’m talking about people you aspire to be like. If you aspire to be a football player, go make friends with the best football players. If you aspire to be a mechanic, go find the top notch mechanics and make friends. Or if you aspire to be rich, surround yourself with people who make more money. Why would I want to surround myself with these people, you might ask. Simple. Knowledge is contagious. If you hang around these people with open eyes, you will learn what they do through osmosis.

Football people talk about football, mechanics talk about cars, rich people talk about being rich. It’s all part of the game. People talk about what excites them.

But don’t stop there– if you want to know about anything, find the expert and interrogate them. You’re thirsting for knowledge and they have the elixir. Experts not only have experience but they’ve also had the experience of watching others fail and make big mistakes. If you want to be truly successful, you must learn from other people’s mistakes.

OPM - Other People’s Money

You can make a lot of money by working hard for a long time and saving. In fact, that’s the traditional thing to do and I wouldn’t be surprised if your mother or father told you to do so.

Imagine if you didn’t have to work so hard to get the same amount of money though. “Where would this money come from?” you might ask. Well, the same way your father probably got the loan to buy his house and got into 30 years of debt that took money out of his pocket, you can put money into yours. Banks, credit unions and various other loan agencies are willing to loan their money out for profit (as I’m sure you’ve heard).

Let’s say at 26, you have a decent credit score and are able to get a $300,000.00 loan to buy a condo duplex. You find a duplex for about $250,000.00 at about 6.5% interest. Your payment comes out to about $1850/mo after tax. Now let’s say you get two renters at $1300/mo each. Now you’re making an extra $750/mo for managing the apartment complex and you’re doing two things:

Profiting $750/mo for doing virtually nothing, therefore increasing your net worth passively.
Buying a piece of property but having other people pay for it.

So at the end of 30 years, you will not only have $270,000.00 in profit but you will also own a duplex which could be worth much, much more.

Now let’s say it’s two years later. You’re 28 and have built up extra cash from the property. Nothing has gone wrong yet, so you’re free and clear. Now you qualify for bigger loan since you’ve established that you can pay on time. You qualify for a bigger loan of about $325,000.00 so you find a house for sale at about $300,000.00 and snatch it up at 6%. After taxes, the payments come out to a nice $2000.00/mo and you’re able to find a renter at $2500.00/mo.

Now you’re earning $1250/mo passively and buying two properties. Imagine if you had 10 properties, or 20. You can see where this could go. Once the bank trusts you with their money, you can make money intelligently. You’re also working smarter instead of harder.

This is no secret, but more so a popular way to become wealthy in both money and assets.

Kids, Start Getting Rich.