I asked my kid what they taught them about money in school. Her answer was simple: “Nothing.”
“Ok, so what do you think they should teach you about money?” I ask. “I don’t know,” she says. Then adds, “how can I become a millionaire?”
Fair question! Let’s get started.
How can I become a millionaire?
Just the other day, someone said to me: I’ll never save that much. Wrong! You can if you start early, invest wisely, and make a habit of it. Ever heard of the 50-30-20 rule? It’s not rocket science. All it means is that you spend 50% of your income on essentials (rent, food etc.); 30% on wants (things you want, but can do without), and save 20%. The 20% you sock away is what will make you rich – eventually.
Starting young gives you the risk appetite advantage. What that means is that when you’re young, you can take more risk. So, find out where you can get the best returns for your money and you’ll be surprised how compounded interest accelerate your savings.
Here’s a simple calculation based on a salary of AED 12,000:
Let’s save 20% of that following the 50-30-20 rule.
20% of 12,000 = 3,000
We’re going to save 3,000 every month for 25 years.
3,000 x 12 x 25 = 900,000
To this, add a conservative rate of return (or compounded interest rate) of 2% over 25 years and you’ve hit your million dirham target already.
Remember, your income will increase over 25 years, so you will likely hit your target much earlier. Also, interest rates, or returns on investment depend on where you invest your money.
Rule number 1. Follow the 50-30-20 faithfully. Start early.
The benefits of using a credit card responsibly
Credit cards are a great tool if used responsibly. They give you a whole 30 days of credit for free, and what’s more, they allow you to buy stuff on credit and pay back in easy instalments. So you can enjoy today what you would have normally had to wait months for. What’s wrong with that? Nothing at all! But like so much else, it can go wrong if used irresponsibly.
Easy access to credit can tempt you to live beyond your means. You start paying back only the minimum balance and with the high interest rates on credit cards, you sink deeper into debt every month.
Rule number 2. Always clear your credit card bill every month.
Investing
Investing is a skill. Be it picking a great investment plan, investing in realty, stocks, shares, or trading. Investing is one of the most financially rewarding things you can learn how to do.
Managing money is a life skill. It must be learnt. And it’s never too late. Read about it, talk to experts, subscribe to newsletters. Wisen up.
A few things you can consider investing in: savings plans, real estate, stocks and shares or even CFDs (look that up).
Knowledge is key, so learn everything you can before you venture into an investment.
Rule number 3. Invest your money wisely for better returns. Knowledge is key. Learn.
How to open and manage a bank account
I was fortunate to have had an uncle who worked for a bank when I was 10 years old. He opened a minor’s bank account for me and taught me how to save . That habit stayed with me.
Luckily, opening a bank account is not hard anymore. With some banks, you can even open an instant account online . Learn about the other products your bank offers – fixed deposits and interest rates, investment plans etc. Plant your money and watch it grow.
And hey, this doesn’t mean you become a scrooge and don’t spend on fun. Just make sure you save some, and you’re good.
Rule number 4. Open a bank account. Refer to Rule 1.
Do I really need to work?
“Mum, do I have to work to earn mega bucks?” That’s my daughter again. “Err, that’s the only way I know.”
“Maybe I’ll just create a masterpiece that will sell for 200 million.” Ta da!
What’s with kids these days and instant gratification? Even money must be instant. Well, some do get lucky, but I wouldn’t bank on that. Honest work, saving and investing will do the trick for you. And it’s a heck of a lot more satisfying to see your savings grow bit by bit.
Rule number 5. Be prepared to put in the work! There’s no such thing as easy money.
Good luck and may you be a millionaire sooner than you think you can!
