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The Snowball and the Bike: Teaching Kids the Power of Compound Interest
A new bike, a little umpire money, and the lesson that time does the heavy lifting. Here’s how I’m teaching my kids that saving before 20 is the real snowball effect — with a simple tool to show the magic of compounding.
The Snowball and the Bike
One of the most important lessons I want my kids to learn is how to get their money working for them. Money should not just sit around waiting to be spent. It should be out there hustling, earning, and growing.
We talk about it in a crawl, walk, run kind of way:
- Crawl is learning to budget. If you cannot keep track of what is coming in and going out, the rest does not matter.
- Walk is saving. Putting money aside for a goal you care about. A bike, a phone, or that thing you just have to have.
- Run is investing. This is where the magic happens. You send your money off to work, and it comes back with friends.
The Bike Fund
Right now, my son has his eye on a new bike. He earns money umpiring baseball games. I love that the game itself has become a way for him to earn. We agreed that it is a 50/50 deal. Half of every paycheck goes straight into investing, and half is his to spend how he chooses. If he wants to save some of that spending money for the bike, that is up to him.
It is a beautiful setup, because he is learning that:
- Investing is non-negotiable. His future self always gets paid.
- Spending is freedom. But with choices. Do I want the bike more than the quick stuff?
- Saving is optional. The middle lane he can use to hit a bigger goal without giving up investing.
The Snowball Effect
When we talked about why investing matters, I explained compound interest. I said:
“If you can have $10,000 invested by the time you are 20, by the time you retire at 65, that will be worth about $730,000 without adding another dime. That is the snowball effect. You let time do the heavy lifting for you.”
He looked at me sideways. “So the earlier I start, the less I have to do?”
Exactly. Money, if you give it time, will outwork you every single day.
Why Saving Is Not Enough
I explained that savings are fine, but inflation is always nibbling away. Keeping money in a savings account is like filling a bucket that has a small leak. Investing is not a nice-to-have skill, it is a necessary one. It is patching the hole and turning on the faucet at the same time.
A Tool, Not a Master
The bike is more than just a ride around the neighborhood. It is a first real lesson that money is a tool. Some of it is for now, some of it is for later. If he wants the bike, he can save for it. But he is also building a snowball in the background that will be impossible to stop once it starts rolling.
We have used this same framework before when teaching our kids about investing in headline opportunities, like we did with Budweiser early this year. Read that post here. This time, it is not just theory. It is a bike. It is the baseball field. It is the very real trade-offs of spending, saving, and investing.
And maybe, when he finally rides that new bike down the street, he will feel a little bit of the freedom that comes with knowing his money is already out there, pedaling ahead of him.
Try It Yourself
Talking about compound interest is one thing. Seeing it is another. That is why I built a simple calculator you can play with below.
Move the slider or tap a preset to set how much money is saved by age 20. Then watch what that amount could grow into by 65, assuming the long-term 10% average annual return of the S&P 500. No more contributions. No tricks. Just time doing the heavy lifting.
It is the snowball effect in action. The earlier the start, the bigger the ride down the hill.
“Know what’s enough. Build what matters.”
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