Golden Rules of Saving. Number 3.
The Third Golden Rule: The earlier you start to save, the faster your money will grow.
“How does money grow?” asked Teyus.
“And please don’t say what my mother always says about money not growing on trees!” moaned Mira.
Grandma chuckled. As a mother and grandmother, she’s had several years of experience telling kids that money doesn’t grow on trees. She was sure all kids had heard that line before, one way or another.
Grandma started again, “Think about a Money Tree. A wild, crazy tree that grows with just a little care from you."
"Imagine, instead of leaves on a regular tree, this tree has dollar bills. Now, every tree starts with something, like seeds. Similarly, your money tree starts with a bit of savings.
Just like a tree needs water and soil to grow, your money tree needs more savings to do the same. So, if you ‘water’ your tree with more savings, soon it will get bigger. Makes sense?”
The kids nodded, it made perfect sense.
Grandma went on, “Now, trees also need sunshine. For our money tree, that sunshine is called ‘interest’.”
“Interest in what?” asked Teyus, a little bit lost.
Grandma explained, “so, when you have a little money, even if it’s only 1 dollar, you can go to a bank and open an account. This means, you make an agreement with the bank that you will keep your money there. In return, they will pay you a little bit of money to do that. This is called ‘interest’. This way, your money stays safe in the bank, and you get some ‘interest’ on top. The longer you keep it in the bank, the more interest you get.”
Mira put her head in her hands and muttered, “My mummy made me an account but I don’t use it. I guess I should. I just keep everything in my little piggy bank at home.” She realized then that she may have lost out on quite a bit of interest.
“But at least you did that!” moaned Teyus, most despondent now. “I spent all my money on those useless toy capsules from vending machines!”