Do you know the power of compound interest?
Savings X Starting Early X Time=Big Returns.
Compound interest is the quickest way to become rich slowly. Simply put, saving money in an interest-bearing savings account or CD (certificate of deposit) grows your savings and wealth. A 20-year-old that contributes $5,000.00 a year, every year, would have $1,932,528.09 by the time they reach the age of 65! This is based on earning an 8.00% rate of interest. That interest and balance are then “compounded” or multiplied. Of course it’s a challenge to always earn 8% in returns, but even if it were only 4%, that nest egg would still be over $1 million!
To reach this realistic goal and nest egg, remember these rules:
- Start as early as possible. It’s never too early to begin saving.
- Be disciplined and make regular investments. Contributing a little each week, or every month will help you achieve your financial goals and build your wealth for the long-term.
- Be patient. Don’t panic or withdraw your money early. Slow and steady wins the race.
- Check your Social Security Statements to calculate how much you can expect at retirement.
- Consider contributing to other investments (ROTH IRA’s) or taking advantage of a company 401K plan.
- Try to live below your means. Instead of blowing your whole paycheck on things you don’t need, consider putting away a little more.