With only $833 a month, you can become a millionaire too!
Imagine you have to choose between the 2 scenarios: (1) Take $1 million and walk away now (2) Wait for 30 days and take the sum of $0.01 being doubled for the next 30 days Which would you choose? If you chose option 1, you would have short changed yourself by over $4 million! This is the power of compound interest. The simple act of doubling the investment from the day before can turn into huge returns just by compounding. Back in reality, it is unlikely to find an investment plan that guarantees 100% return every single day. However, the principle of compounding still stands even for smaller return. Most of us are taught that we should plan for the future and save up. But just how important is saving? Is it really worth it to put aside $833 a month instead of spending it on the weekend trip to Bangkok? Initially it might seem pointless as $800 doesn’t seem like it’ll get you far. That is true only if you leave your money in your savings account that earns 0.05% interest per annum. Things are different when compound interest comes into the picture. Did you know? If you set aside $833 per month from the age of 30, with an interest of 5.5% per annum, you can become a millionaire by 65. The total amount that you have put aside over the 35 years is only $350k but in return you will be getting over $1 million! That’s 3 times the amount that you have put in! Even if you deposit $350k at the age of 50 and with the same interest rate, your money will only grow by 1.5x and you will only get $550k at age 65. That is approximately HALF the return as compared to starting at age 30. Not convinced? Take a look at the table below from our Procrastination Calculator and you will see the stark difference in terms of how much your money grew.
To make compounding work, time is a critical factor. Time is an asset that money can never buy and it is a plays a significant role in the equation to wealth growth. Saving early helps you to turn your spare cash into riches and this is how wealth is built over your life. Compound interest takes a bit of its magic dust and turns small sums that are invested wisely into a whole lot of cash. Not sure if $10k can turn you into a millionaire? Look into your future with our Procrastination Calculator to find out!