When done consistently over time, investing is a great way to build wealth, and position yourself for a comfortable life once you hit retirement. However, the biggest obstacle standing in your way of becoming a retiree-millionaire is time.
Time is constantly ticking, and it can either be your best friend or your worst enemy. If we had unlimited time to prepare for retirement, we could all get rich. Unfortunately, that is not how the world works. More often than not, time is our enemy. Most people start investing too late in life, and with limited time you get limited results… which is why it is important to start as early as possible, and why if you have children you should early by setting up custodial accounts and purchasing a few shares of stock here and there to get them started.
The first lesson my first boss out of college ever taught me was that the secret to becoming rich is compound interest. Compound interest is one of the most beautiful things in this world. Basically, it boils down to interest (or dividends in our case), being reinvested so that when the next payment is due it is slightly higher than the previous one. Over time it can be a powerful tool to build a position, and lead to riches in the future.
The real lesson is that it is never too early to start investing. Instead of letting your child wait until he or she is in their 20s, fresh out of college and burdened with huge college loans, try to open them up a custodial trading account, and put a few dollars in there. Set the account up for dividend reinvestment, and over the years the position will grow and grow.
This puts time on your child's side, and perhaps even more importantly, it may get them interesting in saving and investing at an early age… a powerful life lesson that you can start teaching them as early as today.
Here are a couple stocks that would be great choices for your child's portfolio, and one day may just make them rich.