Learn from Dick and Jane. Don’t Stop Investing, Don’t Be a Dick!
January 4, 2007
The Story
Dick invested $2,000 a year from age 25 to 35, then stopped investing.
Jane invested $2,000 a year from age 35 to age 65. When looking back at her gains she realized that even though she invested more than Dick and they both earned the same annual investment return of 8%, he ended up with $314,879 while she only had $244,692.
The Moral
Begin investing early and put the power of compound growth to work for you.
The Big Question
What I want to know is why Dick stopped investing? If he had continued investing $2,000 annually until he was 65 he would have ended up with $559,562!
Dangerous Example?
I’ve seen this example used many times in the world of personal finance. What message is it sending? People may read it and say, “Okay, I’ll save $2,000 a year for the next ten years then I can stop investing and I’ll be set when I retire!”.
The Alternative
So should the example not be used? I think it does illustrate the point well and could be much improved by simply including how much money Dick would end up with if he’d only kept investing $2,000 annually until he was 65. Then it would convey not only that it’s important to start early but also to be consistent and keep investing.
So what have we learned? Don’t be a Dick! Start investing early and don’t stop!
Thanks to Lazy Man and Money for bringing common investing advice pet peeves to mind with his article.
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[...] In The Carnival of investing at Binary Dollar I talk about how a common investing example commonly used to motivate people to start investing leaves out a key point in Learn from Dick and Jane. Don’t Be a Dick! [...]