Long before Richie Rich gave kids everywhere dreams of being a millionaire, or Shark Tank had us screaming, “I had that idea!” at the television, young people were creating waves (and real wealth, too). But for all of the lucky breaks and wild windfalls, there are a dozen other money-savvy kids building their millions one dollar at a time. With these seven steps and some self-control, the world’s next kid millionaire could be you.
1. Be your own financial goalie.
Think of goals like the stepping stones on your path to riches. If you’re ambitious, set short-, medium-, and long-term goals. An example plan could be to make $50 per week, save $50 per month, and invest $200 per year. Or, keep it simple with a straightforward goal like banking $100 in your trusty ceramic piggy. When you’ve reached your first goal, set another one.
Build a budget.
No amount of income, regardless of how many zeros follow, will become a fortune if you spend every dime. So before you take another step, build a budget. Our previous post provides step-by-step instructions, including listing your income and expenses, having weekly check-ins, and making adjustments as needed.
Make some moolah.
For most kids, this one feels the biggest hurdle. How can you make money when you can’t drive, can’t sign your name to a piece of paper without an adult, and may not be tall enough to see across the bank teller’s window? There are a number of ways kids can make money. A weekly allowance, the occasional lemonade stands, or even starting your own business are realistic ways to stretch your money-making muscles.
Laugh all the way to the bank (a real one).
If your savings account has an uncanny resemblance to your bedroom mattress or jacket pocket, it may be time to get a real savings account. Visit your local bank or credit union and ask about special accounts for kids. They may have fee-free options for the aspiring money-maven, or special perks for teen tycoons.
Grow your dough.
What’s better than a pile of cash that doesn’t lose a cent in value? One with value that increases over time. Yes, kids can invest just like adults. Stocks, bonds, mutual funds, and even commodities like pork bellies and corn. But you’ll need an adult to open what’s called a “custodial account.” Or, start with simple apps that do the investing for you based on the level of risk that you’re comfortable with, like Stash or Wealthsimple.
Hack the power of compound interest.
If there’s one category where kids have a major advantage against adults, it’s the power of compound interest. If you invest early and earn an average of 7-10% interest over time, compound interest can turn a modest amount of money into a million bucks. But it requires saving early and often, and watching your investments to make sure they earn enough interest. Isn’t it great to be young?
Don’t do dumb stuff.
All the right moves can quickly be erased with a single foolish decision. People who fail to make a plan, budget, and save don’t become millionaires. Even some of the world’s most famous faces have let poor money management erase their fortunes. Avoid scams, schemes, and flim-flams. If you do make a mistake, get right back on track. The world is full of wealthy people who made mistakes but didn’t quit and came back to be financially successful.
Want more tips on becoming a kid millionaire? Check out this clip from our episode, “How to Turn $100 into $1,000,000.”