The children of affluent parents sometimes struggle with saving and investing. We all like shiny objects and it can be hard to know how to balance delayed gratification with short-term rewards.

My parents helped instill some principles in me as a young person that have paid real dividends. I’d like to tell you a story of how my high school fast-food job will impact my net worth over time. The title of this article hints at this. But you might be surprised at the real numbers.

The reason I want to tell you this story is because I hear a common concern from my clients when we have a meeting. Many of them are worried that their children do not really understand the importance of financial discipline and investing for the long term. This is probably much simpler and easier than you realize.

I’m hoping that my story might make conversations about financial discipline easier and that it will inspire young people to take simple steps that can have a huge impact on their future.

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"There are many investment options today for affluent families. I enjoy digging in, doing the research and bringing solutions to the table."


The generation gap

Most first generation wealth creators share a common experience. Somewhere in either childhood or early adulthood, a cataclysmic experience altered the course of their life. This might be the death of a loved one, a ruinous financial decision or set of decisions, a divorce, the failure of a business or some other significant life event. Usually these moments leave an indelible impression on the young person.

For the first time in their life, they need to change their habits for their very survival. The security or feeling of peace of mind that had been a part of their life up until this event suddenly evaporates. They feel the sting of necessity and have to make a sink or swim decision. Most first-generation wealth creators are swimmers. They learn to work very hard, live within or beneath their means, invest and save for the future and delay gratification.

It is this mindset and discipline that give rise to their success. This is the classic set of values described by Benjamin Franklin in The Way To Wealth.

But herein lies the challenge.

The children of first-generation wealth creators usually have no such cataclysmic event. More often than not, their parents worked hard, invested and saved precisely so their children would not have to experience the need to work for their very survival. So this creates a conundrum and raises an important question.

How do the parents of affluent children pass along the values that gave rise to their success even though their children did not experience the cataclysmic event? Is this possible and if so, what is the best way to do this?


My story

I grew up in a middle-class family. My father was and is a successful financial advisor who provided for our family. He and my mother went through some hard times as a young couple that shaped their work ethic and personal discipline. But I never had to worry about the basic necessities of life. Food, clothing, shelter and a good education and home-life were always there. I never had to become a survivor.

But my parents instilled some practices in our home-life that have absolutely benefitted me and my siblings. First, they provided for the basic necessities, but as soon as we were able to do household chores they made this statement. “We will provide for your basic needs while you are a child, but you will need to work for anything else you may want.”

Most of our early jobs were around the house. I remember fighting with my brother over who got to mow the lawn because it was a big deal to us to get the $20 for this job. There were all sorts of things that I wanted, but I knew that I had to work to get them. Sometimes my parents would match our savings on larger items, like my brother’s electric keyboard, but we had to work and save to achieve the goals.

We soon figured out that the real money could be found working outside our home. So I got a job at 15 years old working for a fast-food restaurant. Very quickly I learned the connection between work, standing on my feet up to eight hours a shift, and money. It gave me a new appreciation for the value of a dollar.


My parent’s approach

When I got my first paycheck, I thought I was rolling in the dough… until my parents sat me down and had a conversation about how I was going to spend that paycheck. They came to me with a formula that at first I didn’t like, but that has really worked for me over time.

They said that I had to split-up my paycheck in three equal ways. The first part of my paycheck had to go into a long-term savings account. The second part had to go into a savings account for larger items, like a new trombone, pool cue, or collectible comic books. The third part of my paycheck could be spent on fun things I wanted to do, like going to movies and hanging out with friends.

What I didn’t know at the time is how important this strategy would be to my net-worth. I also didn’t understand how this approach would become a lifestyle that would calcify disciplines that soon became old hat, easy to follow. Eventually, this is just how I did things. 


My long-term investments

Between the ages of 15 and 18, I worked a combination of part-time and full-time hours at the fast food job. When I was on break from school, I would get more shifts and earn more money. During school, I only worked part-time. But I stuck to the 3-way split plan that my parents instituted.

By the time I turned 18 and headed off to college, my long-term savings account had over $3,000 in it. Here is the important part I want to share with you. I really didn’t miss the money.

It was easy for me to put the funds in the savings account, in part because the fast food company had a stock plan and in part because it just became habit. I enjoyed spending the fun money and found enough satisfaction with those dollars that I really didn’t mind making the investments. I learned to have fun on the dollars that I had available.

After I graduated from college, I rolled over the $3,000 from the fast food job into a new investment account. I sort of forgot about it, even though I kept an eye on it and made sure it wasn’t losing value due to poor investment decisions.


The value of my early investment decisions

In preparing for this article, I startled myself. I ran the numbers on the long-term returns from my initial $3,000 investment and couldn’t quite believe my eyes. I think you’ll see why. But before we look at the numbers, please allow me to explain my assumptions.

First, I am assuming that I invested $3,000 by the age of 18 with no future contributions. Second, I am assuming that I reinvest all proceeds and do not withdraw any funds. Third, I am assuming an average annual growth rate of 10%, which is in line with the long term return of the US stock market.

Given these assumptions, here is what I am projecting:

  • By age 40, my $3,000 investment will be worth $32,504.
  • By age 65, my $3,000 investment will be worth $352,172.
  • By age 75, my $3,000 investment will be worth $913,444.
  • By age 85, my $3,000 investment will be worth $2,369,240.
  • By age 87, my life expectancy, my $3,000 investment will be worth $2,866,781.

But here is the important point I want to share. I never missed that $3,000 from my teenage years. I didn’t feel like somehow I was cheated of a life experience that would have made my life better. More importantly, I learned the value of living within my means. This is a lesson that has stayed with me long after that fast food job and into my career where I’m earning a much higher income.

In case you were wondering, if I had waited 10 years, until age 25, to make the $3,000 investment, given the same assumptions above, my $3,000 would only be worth $1,105,268 by age 87. So waiting until I got my first “real” job out of college to start saving for retirement would have cost me $1,761,513! This is the power of compounding interest and investing early.


How can this benefit you?

My parents instituted a 3-way split on my paycheck. But I have come up with my own 3-way formula that I would like to share with you:

  • Earn the best income you can.
  • Learn to live within or beneath your means.
  • Maximize your investments in retirement and tax deferred accounts early in life.

This model can empower young people to achieve a level of net-worth that can be astounding. If you or someone you care about is struggling to help a young person learn the value of early investing and financial discipline, I encourage you to send them this article. If my story can help your children or grandchildren make meaningful financial decisions, I welcome the opportunity to have a conversation with them.


The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.