Get To A Million Dollars With Small Change

by Silicon Valley Blogger on 2008-02-2823

I’m starting to introduce some new writers to The Digerati Life to give you some fresh, maybe even different perspectives on finance. One of those writers is Debbie Dragon, a full time freelance writer and web designer who works on a variety of projects such as, and a co-writer of the Empowering Mom blog.

Here, Debbie discusses ensuring yourself a million dollars by retirement age if you invest early. Take note though, that due to inflation, the future value of today’s $1,000,000 is around $225,000 in 50 years’ time, so you’ll need to invest 4.5 times harder (assuming today’s benign inflation rates) to get to a “true” million by the age of 67.


I’ve been working since I was 16 years old. I didn’t know that I could have been creating my first million with my summer jobs! At 28, things are a little different for me since I have so many more expenses and responsibilities than I did at 16; but I’m thrilled to have learned this before my own children start working. I maybe didn’t do it right for myself, but I can certainly help steer them in the right direction.

Here’s how to start earning your first million at 16, as Scott Burns describes in his column, “Small Change Millionaire Cookbook”.

You need to have a summer job, and you’re goal is to earn $2,000 each summer for four years. This may sound like a lot at first; but I think that’s completely reasonable considering I earned more than that in a summer working in a fast food shop as a teenager. You have to put in a little sweat equity to get your $2,000 — but let me show you why it’s worth it.

At the end of each summer for four summers, you would put $2,000 into a Roth IRA. Money in these accounts grow tax-free; and you can take the money out after age 59 ½ completely tax-free. Invest the money in the equity market, which means you earn about 10.7% (the average compound annual rate).

At the end of four years of working summer jobs (each year you’ve deposited $2,000), your account will have grown to $9,378 and you’ll have aged to the ripe old age of 20. Keep your money where it is, and if you don’t contribute anything more to it, ever, this is what you’d be looking at:

$25,917 by the time you are 30
$71,625 by the time you are 40
$197,943 by the time you are 50
$547,037 by the time you are 60
And $1,114,423 by the time you are 67

So, it’s too late for me to contribute just $2,000 a year for four years to see those kind of results at the age of 67, but it’s definitely not too late for my kids, ages 5 and 2. I love this idea that Scott Burns promotes — that small change will add up significantly over time. The bad news may be that 10 extra calories a day causes a weight gain of 1 pound per year but the good news is that money grows faster than fat! You probably know how tough it is to lose weight but how easy it is to gain the pounds; well, it can be just as easy to grow your first million, a little at a time.

Copyright © 2008 The Digerati Life. All Rights Reserved.

{ 14 comments… read them below or add one }

kim February 28, 2008 at 1:23 pm

Interesting, you wouldn’t think 2K would add up to such a high number, even if you are looking at 40-50 years.

Tom February 28, 2008 at 3:17 pm

Awesome post. People don’t realize how fast your money can grow without touching it. I think every young kid in high school should be forced to take a savings class just to show them these numbers.

RacerX February 28, 2008 at 4:44 pm

Great piece. Just talked about something similar on my blog about what every kid should know about finance.

The Power of Compounding

UncleNutJob February 28, 2008 at 5:03 pm

great article… thanx for your efforts! Always love finding others with a few brain cells.
i have bookmarked you and will be checking back frequently.

if you’d like, check out my article on inflation at


Mark February 28, 2008 at 5:29 pm

I wish every parent would sit down with their kids and sell them on this kind of behavior. When I was little my parents had us on a forced savings plan of 40% of everything we earned. It added up.

Parents could really blow their kids’ minds if they carried the example on through the college years and the first years of their professional life. For example, if in their first two summers during college the saved $4000 instead of $2000, this would be the end result:

At age 67 they’d have $2,596,491.72, even if they never made another deposit after age 20! Of course that assumes my math is right. 🙂 Our kids need to know this.

Excellent post!


Frugal Dad February 28, 2008 at 8:12 pm

This is such a fantastic deal that I would even consider doubling their contribution with my own money if they only invested half their earnings (as long as the total contribution doesn’t exceed their gross income, or the individual limit, this is allowable). So in your scenario my kids could earn $2,000 and only invest $1k – I’d match the other $1k. Then they could use the other grand for back-to-school shopping, saving up for a car, etc.

This was an awesome article!

Ron@TheWisdomJournal February 29, 2008 at 4:45 am

Just imagine if you open a Roth for the 5 year old NOW. Give him/her some little job to perform since the money has to be “earned” and look at just putting in $500 per year until he/she starts contributing the $2,000.

The amount goes up to over $3.3 million (using your same numbers)

Becky@FamilyandFinances February 29, 2008 at 11:51 am

I first read charts like this in “Smart Women Finish Rich” and it still amazes me how so little can grow to so much given enough time to compound! 🙂

Tim March 5, 2008 at 7:48 am

That’s really interesting, except that when I was working summer jobs as a student, I needed every penny I earned to pay for food and rent. If I had parents that paid for every expence I probably wouldn’t have the motivation for a summer job.

Options Strategery March 12, 2008 at 2:10 am

Too bad the days of 10.7% nominal returns are long gone (they included P/E expansion which is not sustainable). Long term earnings growth is closer to 6-7%. Add in 3-4% inflation and it isn’t as motivating.

However, if the bad numbers can convince someone to save, I suppose the end justifies the means.

Anthony January 3, 2009 at 5:24 pm

Yeah…inflation is a real drag. And look out…with all the money the Central Banks will be printing these days, quite likely we’re headed for big inflation. I like Obama but he is also in big spender mode and the US is going to have to borrow for it. How will they repay without devaluing the dollar?

Josh February 19, 2009 at 2:29 pm

Ya Im a young teenager and I have been saving since I was 12 and I have 5 Grand now but what is a Roth IRA?

donna September 22, 2010 at 4:47 pm

i thought you had to have a job to invest in a roth ira; i imagine this would exclude most 5 year OLDS.

LCastro September 27, 2010 at 9:05 pm

The Power of Compound Gain Plus Core Asset Conservation Equals Long-Term Stability, Security and Peace of Mind for The Family.

Leave a Comment