Your Kids' First Job: Rags to Riches

How much of a factor should money be in your children's choice of a career? It's not the first thing they should be thinking about. Work is how they're going to spend a very large portion of the rest of their life. But, on the other hand, they want to be able to buy the occasional iPad.
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Some of our sports heroes are paid millions of dollars a year like Payton Manning, of the Broncos, at 18 million. Derek Jeter of the Yankees agreed to a one-year, 12 million contract. And, Shaquille O'Neal is reported to have made 20 million in 2013 -- and he isn't even playing any more. Actor Leonardo DiCaprio earned $20 million for his role in The Great Gatsby. We won't even talk about the titans of industry such as Warren Buffet and Bill Gates.

How much should your children expect to make on their first job? Kids realize that when they're just starting out, they won't be in the same league as these stars. They probably aren't going make one million -- in real life, it won't even be close.

As a rule, kids generally overestimate how much money people make and underestimate how much things cost. They know, give or take a little, the cost of the things they buy or want, like that iPad Air at $499. However, they need to think about the value of things in terms of real value. If you make 50 million a year, about one million a week, the iPad is about .002 percent of the weekly earnings. On the other hand, if you're making $50,000 a year, the iPad is about 25 percent of your weekly earning or nearly one day's worth of work. It's worse if you stop and consider that only about two-thirds of that weekly earned amount is "take-home" pay, and, of course, there is probably sales tax on the iPod. Now the value of the iPod increases to about one-third of the weekly earnings or almost two days of work.

How much of a factor should money be in your children's choice of a career? It's not the first thing they should be thinking about. Work is how they're going to spend a very large portion of the rest of their life, so they'll want it to be fulfilling, challenging and interesting. But, on the other hand, they want to be able to buy the occasional iPad, go to a concert, live in a nice place and eventually send their children to college.

Let's look at what people really make. There is no hard and fast rule, but in general, what people make is closely tied to education. On average, the more education you have, the better your income is likely to be. The average earnings for U.S. workers range from $32,552 for those with a high school diploma to $53,976 for those with a Bachelor's degree. Over a lifetime, workers with Doctoral degrees earn $1.3 million dollars more than those with a Bachelors degree. Have your children do some research. What are the starting salaries in different careers? How much can they expect to make after 10 years? What level of education is needed?

Every year there are articles written showing the best fields of opportunity, and they change from year to year. Your children can research this starting with the Bureau of Labor Statistics. They should keep in mind that the high-paying jobs will almost always go to the people with a good education.

Even if your children are not at the point in their lives at which they are ready to start a career, it isn't too early to learn the important lesson about how to make the most of they money they do earn. That's true even if they just have odd jobs or work in the summer. It isn't too soon to put their money to work. Savings -- even modest savings -- can grow, especially if they start young.

This is a place where numbers really speak more eloquently than words. Here is an example: Your children are offered two different jobs. Let's aim high.

The first person offers them a job for a month with a paycheck of one million at the end of the month.

The other person offers them a job for a month and says they will put a penny in a payroll account for them, and they will double the amount in the account every day. They will get what is in the account at the end of the month.

Seems like a simple choice to make, right? The second offer doesn't sound like much of a deal and resisting the million dollars would be hard. However, have your children pull out their calculator and do the math. They'll discover that at the end of a 31-day month, that first penny -- doubled and redoubled -- will have grown to $10,737,418.24!

Wow! Your children will want to know how that happened. It's the miracle of compounding -- the fact that money, left alone to accrue interest, will make more money and, eventually, that will happen at a rate that will stagger your children.

Of course, no one is really going to offer to pay your children a penny and double it every day, but real numbers they can expect in an ordinary life are pretty impressive, too.

Let's say your children agree to work for employer number two but don't want to wait a month to start spending. So they say, "Give me half the money in the account every day, starting on the second day. I'll settle for five million at the end of two months."

Now what happens?

On the first day, the kids will have a penny credited to their account. On the second day their account doubles, so it is worth two cents. But since they want to have money to spend, they take one of the pennies and save the other penny in their account. On the third day, as promised, their account is doubled from one cent to two. Again they take a penny to spend leaving a penny in their account. This goes on for the two months. What is the result?

The result is that they never get ahead. At the end of the two months they will have taken 61 cents for spending money and the balance in their account will be a penny.

These examples are ones your children should consider. The younger they start to save, the more the magic of compounding will be real in their lives.

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