The path to wealth is closer than many young people suspect. And the good news is that the younger you are, the greater the opportunity is.
If you have $15.26 in your pocket, it takes 16 doublings of your money to reach $1 million.
Now skeptics might read that and say, “That’s nuts. Doubling on the low end is easy. Doubling on the high end is near impossible.”
Like a game show host, we can only ask, “Is that your final answer?” If negative thinking is your final answer, no one can help you.
What are the tools that a teen or preteen can use to build wealth?
The first tool is belief in yourself. If you don’t think you can do it, you won’t put in the time to prepare to succeed. As IBD founder William J. O’Neil is fond of saying, “I’ve never met a successful pessimist.”
The second tool is a job. As Marshall Brain wrote in “The Teenager’s Guide to the Real World,” some young people “live in a protected dream world that totally isolates them from the realities of financial life.” Get a job.
If you’re too young for a job, find chores to do for neighbors: lawn mowing, dog walking, etc.
The third tool is frugality. How much money you make isn’t as important as how much you save.
Tool four is to avoid money pits. A car makes wealth-building hard, so take a bus or bike. Likewise for a baby, so take cold showers. “Spend some time with someone who has a baby and see how much work is involved,” Brain writes.
As you launch your wealth quest, be aware that starting early is important. Most people don’t think about wealth “until they are well into their 20s or 30s. By then it is more difficult to do anything about it,” Brain writes.
From age 10 to 15, a kid can climb part of the 16-step wealth ladder.
Realistically, a kid living at home can save 50% to 75% of income. Getting to the ninth or 10th rung by the time you’re 16 is achievable.
In many states, 16 is when a teen can get a minimum wage job. Your savings should accelerate.
Doubling, though, calls for a new tool. This is the time to learn about the stock market.
Read “How to Make Money in Stocks” by William J. O’Neil.
After you read it, you might become enthused. If so, read it again. Enthusiasm is the wrong mentality to bring into the stock market.
Now if you can blend frugal living with investing, you’ll build wealth.
The stock market will alter the way you look at life. You’ll see small and big consumer purchases as money that could go into your brokerage account.
What about college?
If college is your idea of a place to drink beer and socialize, skip it. If you think college is a place to “change the world,” you’re probably a menace to yourself and society. It’s not too late to get a job.
The real change occurs inside your mind, if you are to succeed.
(This column originally published in the Nov. 20, 2015, edition of IBD.)