I will be writing some post to try to educate my kids. I know they are still very young (4 and 7) but it is never too early to start. And the can read these blog posts later on in life 😉 (This is probably the case, because they don’t speak or read English very well at this moment – You got to love an understatement!).
Everybody knows Warren Buffett. It is said that he is the greatest investor in the world. And I won’t argue with that. He is an inspiration for me and many DGI’s. Just by reading his yearly letters to the shareholders of Berkshire Hathaway, you can learn a lot about investing and the strategy of Mr. Buffett.
Every strong man has a strong partner. So is also the case for Mr. Buffett. His business partner and his right hand is Charlie Munger. He once said: The first € 100,000 is the toughest. Once you cross that threshold, doors begin to open up fairly quickly and the snowball that we call compounding starts to work its magic in a meaningful way.
Everybody who wants to be rich, just need to start saving. It’s like the Chinese verb: Every journey starts with the first small step.
The first € 100.00 will be tough, but you just have to do it. It doesn’t matter how you do it. After you have build an investment portfolio of € 100,000, the rest will go much easier.
And of course this is really hard, you want to live and enjoy life. Go out with friends, have a good time. This is why most people do not succeed to build a portfolio of € 100,000. This because most people spend more than the save of invest. A personal loan or a credit card has become normal nowadays. But my advice is: start saving/investing today. Give your snowball time to grow. The sooner you start the better.
In Part 3 I told you about compound interest and the magic of it. So lets see what € 100,000 can do.
If we invest the original € 100,000 and get an annual return of say 6%, your interest in the first year will be € 6,000. After five years, with the magic of compound interest, your € 100,000 is worth € 133,823!! And after 20 years € 320,714
Wow what a numbers. And a return of 6% is not very hard as a DGI.
But to reach your first €100,000, you have to scrape/save every penny. Make offers (E.g. using your bike instead of your car), life frugal (but still enjoy life ;-)) and make the right decisions. But once you are there, it is become a part of your life. It will not be very hard to continue saving/investing. So keep donating fresh capital to your portfolio/fund. And reinvest the dividends.
And then your snowball will be rolling even harder! And within 20 years you will be able to life of your dividend. How cool is that!
I know how hard it is to reach your first € 100,000. Sometimes you have to make tough decisions. And give up things. But always reminder to enjoy life! From my own experience I know it is hard sometimes. But it will all be worth it! I’m sure. I’m more than half way of reaching my first € 100,000. So I know what I’m talking about. Keep saving and investing! That’s the message I want to teach my kids.
This is my fourth blog about teaching my kids. I hope my kids at the age of say 18 have all the financial knowledge I have right now. This would be a huge advantage for them! And that’s why I started these blog post series.
Did or do you teach your kids about the first € 100,000? How did you do it?