It seems as if learning how to manage our money will always require some self-education.

Artesia is blessed with qualified Financial Advisors. Also, money management authors and podcasters such as Dave Ramsey are available to help us navigate how we should manage our hard-earned paychecks and savings. Dave Ramsey recommends that we seek out a Financial Advisor with whom we can be comfortable. Whether we are able to begin our intentional savings early on or later in life, it is best to just get started and not put this off.

Dave Ramsey’s book, The Total Money Makeover, is a good starting point. Briefly, his Baby Step 1 challenges the reader to save $1,000 for their Starter Emergency Fund. He states that only 32% of Americans have the available cash for a $400 emergency. Dave gives helpful tips on planning meals, selling stuff, and other recommendations to save for the Starter Emergency Fund.

Dave has seven total Baby Steps with instructions to go about achieving what is discussed in these steps. The following is a very brief summary of some of these steps as an impetus to read this highly informative book:

After the Starter Emergency Fund has been attained, Dave outlines the process of paying off debt, with the exception of the house mortgage which will occur in a later step. He will go into great detail about the importance of this accomplishment. Following the retirement of debt, with the exception of the house mortgage, he states the reader should save for a 3–6 month Fully Funded Emergency Fund. Dave mentions that a couple might be able to get by with only 3 months of projected expenses if both have jobs. The next step would be to invest 15% of household income into retirement and investment accounts. It would be helpful to visit with a Financial Advisor by this point if not sooner. Only later, which could be quite a number of years, would most folks be able to retire their house mortgage. Not all the steps have been touched upon here. The key points of intentional saving and debt retirement are important to attaining some financial stability.

It is informative to see the simplicity of putting our savings to work. Let’s utilize an Investment Calculator located at calculator.net for instance, and plug in the following investment numbers:

1. Starting amount of $1,000.
2. 30 years time frame.
3. Average rate of return: 8%. This rate of return is feasible due to the historical performance of Mutual Funds and ETFs.
4. Monthly compounding. These calculations will utilize a monthly compounding of interest. An important factor of compounding is the frequency with which interest is accrued on investments. Different types of accounts may have differing compounding periods such as monthly, quarterly, or annually.
5. $200 additional monthly contribution throughout the time frame. This may require driving a used vehicle for a longer period of time or other money saving techniques. Even if difficult early on, it is best to at least start with a smaller contribution amount and work up to a goal. Some folks may be able to start at higher numbers than what is being shown in these calculations. Regardless, it is best to make intentional, monthly contributions if possible.

Now it is time to run the numbers represented in the investment calculator steps 1–5. After the 30 years, the investments should be valued at $309,007. At $200 a month for 30 years, $72,000 was additionally placed into the account. That is putting investment money to work. This is just a tip-of-the-iceberg glance.

Let’s dig a little deeper by inserting some different assumptions into the above-mentioned investment scenario. For instance, if a person or couple begins their intentional savings at age 25, and we utilize 40 years in Step 2, that would take the investment horizon to age 65. Just by adding 10 more years to the formula with no other changes, the account balance would be $722,474. $96,000 would have been additionally invested with $200 a month over the 40 years. That is quite a return on dollars invested.

Let’s add one more change and still keep the 40-year time frame. In Step 1 we will insert $15,000 as the starting amount. The ending account balance should be $1,062,302, with the same $96,000 additional money invested at the $200 a month over 40 years. That is really letting money work hard for the investor. This last example shows how dynamic our investments can be if we are able to knuckle down and put as much savings to work as possible very early on.

Finding an Investment Calculator and plugging in all sorts of different scenarios that apply to our goals can be a huge step forward in understanding the importance of saving early and saving often. Hopefully, students who are planning their next steps in life, whether work, college, or technical school, will begin an intentional saving program. They would be able to experience the highly valuable benefit of the extra years of compounding on their investments. It will likely be the parents, grandparents, or close friends that show the value of early investing to the younger generations.