A finance expert has revealed his secrets to saving money by booking about $ 140,000 before his son turns 21 (stock image)

A finance expert has revealed his secrets to saving money by reserving an incredible $ 140,000 by the time his son turns 21.

Scott Pape, who is the best-selling author of Barefoot Investor, said the goal may seem unrealistic, but its simple saving trick will help you increase your bank account by thousands of dollars.

The father of two, from Victoria, said the easiest way to turn a small sum into large amounts of money is to earn compound interest in his savings account.

"A single investment of, say, $ 2,000, plus $ 50 a week, could be worth more than $ 140,000 in 21 years," Mr. Pape wrote in his book.

A finance expert has revealed his secrets to saving money by booking about $ 140,000 before his son turns 21 (stock image)

A finance expert has revealed his secrets to saving money by booking about $ 140,000 before his son turns 21 (stock image)

Father Scott Pape (pictured), who is the best-selling author of Barefoot Investor, said the goal may seem unrealistic but is quite feasible with a simple budget

Father Scott Pape (pictured), who is the best-selling author of Barefoot Investor, said the goal may seem unrealistic but is quite feasible with a simple budget

Father Scott Pape (pictured), who is the best-selling author of Barefoot Investor, said the goal may seem unrealistic but is quite feasible with a simple budget

What is the composed interest?

With compound interest, the interest rate applies to both the principal and any previous interest earned; In other words, you earn interest on interest. Basically, it means that your money will grow exponentially over time instead of linearly, which you would if you earned a simple interest.

For example, $ 1,000 earning 2% p.a monthly compound would become $ 1,020.18 after the first year; This is because after the first month, the interest rate applies to both the principal (the $ 1,000) and the interest that was already added to the account.

Compound interest paid on the principal would increase slowly but surely at a faster rate than any simple interest paid on the same principal.

Source: Canstar

"Most parents have their money in a bank account and bank accounts usually pay Bugger all interest, so they know they have some interesting offers for fees, but if they are going to invest 10 to 20 years, they really want to be "Investing in high growth assets," he told Kidspot.

& # 39; Einstein said that that is the eighth wonder of the world, compound interest; Earning interest on your interest, this is how you convert small amounts of money into large amounts of money.

Compound interest is the money the bank pays you as a reward for depositing your money in a savings account; It could also be considered an incentive to put your money in the hands of the bank.

With any growing family, Mr. Pape said that parents can get carried away by raising children under their roofs, so earning compound interest was the best solution to save.

"Life is messy, so this is an idea of ​​whether you can fix it and make it automatic, so you do not have to think about it, you can do some incredible things," he said.

His advice comes a few weeks after he encouraged old-fashioned methods of storing cash in jars of jam as a tool to teach children the value of money and how to save.

  His advice comes a few weeks after he encouraged old-fashioned methods of storing cash in jars of jam as a tool to teach children the value of money and how to save.

  His advice comes a few weeks after he encouraged old-fashioned methods of storing cash in jars of jam as a tool to teach children the value of money and how to save.

His advice comes a few weeks after he encouraged old-fashioned methods of storing cash in jars of jam as a tool to teach children the value of money and how to save.

The father is known as the best-selling author of Barefoot Investor.

The father is known as the best-selling author of Barefoot Investor.

The father is known as the best-selling author of Barefoot Investor.

He said children can learn to appreciate money by storing coins in jars of jam and doing odd jobs around the house.

Mr. Pape said the children are under the illusion that the money will be delivered without being earned.

He believes that the secret success when teaching children to save is to manage physical money instead of creating an account.

"It's more important now that money becomes invisible, so for me to use jars of jam makes sense," Pape told News.com.au.

The author said that in the boom of the digital age and the payment method & # 39; tap and go & # 39;, children do not understand the physical monetary transaction.

"They want to see the money and have a direct link between the work and the money that accumulates."

Mr. Pape said that many parents are unwilling to give pocket money and do not encourage their children to earn it through manual labor.

The bestselling author uses a simplistic three-jar policy, which includes spending, smiling and giving, and is convinced that this will help the children financially.

& # 39; Many parents are sporadic with their pocket money, in my opinion, children need to do jobs and, if they do not do the jobs, do not pay them.

"It's very easy to do, no matter how much you pay them, for some families it could be a dollar per age per week, so $ 6 per week for a six-year-old child," he said.

Eighty-two percent of parents believed that children should be taught how to handle money both at school and at home.

Half of parents believe that the financial education taught in schools is good enough, since 76 percent of parents would like to have a solid education about money at school.

The research also found that 40 percent of children are convinced that their parents' credit card is their own money, while 60 percent believe it is the bank's money.

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