This is Pat Haggerty with Larchmont Wealth and I’m here again today for another episode of Bridget’s Bucks. Okay and today I’m going to teach Bridget how you can make a million dollars in the stock market. You ready? Okay.
So the first step is you have to have a job. You have to have a job where you have earned income, which means that you have a job, that you get money through a paycheck. Do you have a job where you get money through a paycheck yet? No. You get an allowance and you work and you have little jobs that you do but you don’t have money through a paycheck yet. When you do, you’re able to open up what’s called a Roth IRA, so we’ll write this on the board and I’ll walk you through this. So a Roth IRA is the first step and when you have earned income you can open up the Roth IRA. And the maximum contribution that you can make to a Roth IRA is six thousand dollars. Okay so if you make one six thousand dollar contribution to a Roth IRA, which is kind of a lot of money for a kid, but still if you work really hard in the summer, you can make six thousand dollars in the summer, and you put that into a Roth IRA one time.
If you invest that into, like the Russell 2000 Index which is a, it’s a group, it’s a basket of stocks that are smaller companies that can grow. The Russell 2000 Index has averaged 13 percent over the last 10 years in average annual growth. Six thousand dollars at 13% and let’s say we put it into that Roth IRA for 40 years. How old are you now? Eight. Okay so in 40 years, how old are you going to be? 48. That’s right. So in 40 years when Bridget is 48 years old, at 13 percent, if that’s compounding every month, you remember compound growth? What does compound growth mean, do you remember? Making more money. That’s when your money makes more money. That’s right, add it up. That’s right and it keeps on growing more money. So you compound every month, every month money’s growing more money.
And when you are 48 years old the total amount that one six thousand dollar contribution will make is $1,057,639. And that is how with one summer of hard work invested right, you can make a million dollars, because that money that comes out in a Roth IRA has no taxes at the end, so that means that you make every penny of that. Okay so that’s how you make a million dollars from one six thousand dollar investment. So the first step is you have to get a summer job which you’re not quite old enough yet but we’ll be there soon. All right so this is Pat Haggerty, I’m with Largemouth Wealth and this is Bridget. Okay that’s another episode of Bridget’s Buck’s. All right, thanks for watching.