From Simple Dollar Blog:

We all struggle with how to make retirement interesting to high school students who tend to be short-term oriented. You can use this chart to ask the question "How soon can YOU get to financial independence?" 

First, let me provide some orientation:

• X-axis tracks after-tax annual income
• Y-axis has annual spending
• Number inside the grid are years until financial independence

For example, a recent college grad with after-tax pay of $35k ($35,000) who spends $20k ($20,000) a year would have 20.1 years until financial independence aka retirement. If you want to dive deeper into the spreadsheet math, there is an assumption baked in regarding inflation and the annual return that you can earn from these accumulated savings. I reverse-engineered these calculations in this spreadsheet. The endpoint shows an investment portfolio of $600,000 which provides a nest egg that can be withdrawn at a rate of 4% a year ($24,000) to cover annual expenses eliminating the need for another source of income. 

Here's an interesting question to ask your students. Which individual do you think can retire soonest? 

1. Samantha earns after-tax income of $80,000 and saves 50% of her income? 
2. Bill earns after-tax income of $60,000 and saves 50% of her income? 
3. Earl earns after-tax income of $40,000 and saves 50% of her income? 

The answer: They would all achieve financial independence in about 17 years (16.6 years per the chart). This provides the useful reminder that it's not how much you earn as much as it is how much you spend! 

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Whet your students' appetite for financial independence by having them listen to this NGPF podcast with Canada's youngest retirees, Bryce Leung and Kristen Shen. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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