Clark Howard's Tips

September 4, 2008

Many employers match what employees contribute to a 401(k) plan up to a certain limit. Well, Clark extended the same offer to his teen daughter about 4 years ago. He calls it "the daddy match" and he puts a dollar into her Roth account for every dollar of her pay she saves.

It's no secret that getting a teen to start saving early will help insure their financial security later in life. Clark loves pointing to a chart that shows a teen who starts saving at 15 and puts aside $2,000 for 7 years will have more than $1 million at 65. That's assuming a return on investment of about 8%, of course.

Money has a strong ally in time. Most financial models show that your money doubles in value every 9 years.

Syndicated financial writer Umberto Cruz recently crunched the numbers and found that a 20 year old who puts $2,000 in a Roth for 10 years will have just under $500K at retirement time. And that's with never having to save again! If you wait until you're 30 and save at the same rate, you'll only have $370K at 65. So the message is clear: The earlier you start saving, the better off you'll be.

The same thinking applies to your car purchase. The Wall Street Journal reports that if you buy a Toyota Camry instead of a BMW and invest the money you saved, you'll have about $26K after 10 years. Do it all over again 10 years later and you'll have about $100K in 20 years. This is proof that an isolated decision today can make a huge difference down the road.

Consumer advice courtesy of