Banking, Interest, Being a minor.?Ever since i opened my own bank account (a custodian account since i am under 18) i have been thinking more about saving and making interest on my money. The only problem is the interest rate is terrible. Honestly i thought it would be more than what it is. At the beginning i had $688.31 and after 3 months i had... | |
First off: You are way ahead of the game to be thinking about finances while still a minor and I applaud you.
Now that site you reference is talking about the power of compounding interest. Time combined with interest can make you a millionaire; this is true.
Whenever articles like this talk about 8% interest and up they are taking into account the rate of return (on average) of different investments that vary by risk and return.
Now you have your money in a savings account which is the most conservative of "investments". Now there are a lot of factors that indirectly effect that interest rate on a savings account but in the end your bank determines the exact rate. Right now the run of the mill savings account (most often used for minor savings) will make you anywhere from 0.05% to 0.15% (what does that mean? you get 0.0015 times your balance for the year in interest. Stingy... stodgy... bankers. Jerks aren't paying out are they.)
That's typical for savings. Even the best rates right now at credit unions that are hurting for money max out around 3%, which is a far cry from 8% or 11%.
On that note, in order to make 8% or more every year you have to invest into more aggressive investments. It is often said that the stock market returns an average of 10% per year over a long time frame (30 year or more) and that is how you supposedly become a millionaire.
Now it's not as cut and dry as just investing into a market. You can buy stock (I don't recommend this right now), preferred stock, bonds, you can even buy government debt.
Investopedia.com is a great place to find out about the many options in the market but if you can find a mentor that will help you out that is the best method.
