The most basic investing strategy is not hard to understand. Perhaps the easiest tactic is to leave my money alone and let it accumulate over time, or ''compound''.
Two basic principles of ''compound'' are:
1. The more I save, the faster it grows
2. The earlier I start to invest, the more dramatic my money can grow.
Firstly, I should understand and believe that money can grow over time. The process is slow but it is a sure way to accumulate wealth in a long run. To illustrate the power of compound interest, let see simple cases.
Case 1
Ali is saving RM200 in ASB every month without fail since he is 25. Let's assume that the dividend of ASB is 7% every year. 25 years later, at age 50 the total saving he has is RM157,533.35.
The amazing fact behind this number is that: the total money that Ali actually put in during those year is RM60,000. This is only 38.1% of his total wealth. A total of RM97,553.35 is accumulated compound interest!!
Case 2
Saving for children education is a prime concern of most parents. When Abu is having his first baby, he has saved RM10,000 at that time. He put the money in a bank with an interest of 8% per year for his baby education. When the baby grew up and ready to enter university, Abu already has RM 50,338.34 as a result of his 20 years investment. See how RM10,000 can grow to 5 times its value in 20 years. Abu no need to worry about settling down his son education fee. But a lump sum of RM10,000 is too much for many parents.
Case 3
RM10,000 is maybe too much. To be more realistic, Zainab save RM100 per month for her baby education since she knew she is pregnant. After 7 years, her total saving is RM11,171.35. From that moment, she stops her regular saving and let the money grow by itself. When her child reaches age 20, the saving has grown RM30,381.87. This can be used to finance her child education at local university.
I have not earn my first wage from a formal job yet. So, I have no experience on how it feel to receive the first pay. At university, I work part time as a domestic assistant or cleaner. I cleaned university hall of residence and being paid almost equivalent to the national minimum wage. Most of the money was used to fund my travel around Europe. Anyway, that when I was a student, had no idea of saving and compound interest.
To calculate the compound interest of your investment, click here.
Two basic principles of ''compound'' are:
1. The more I save, the faster it grows
2. The earlier I start to invest, the more dramatic my money can grow.
Firstly, I should understand and believe that money can grow over time. The process is slow but it is a sure way to accumulate wealth in a long run. To illustrate the power of compound interest, let see simple cases.
Case 1
Ali is saving RM200 in ASB every month without fail since he is 25. Let's assume that the dividend of ASB is 7% every year. 25 years later, at age 50 the total saving he has is RM157,533.35.
The amazing fact behind this number is that: the total money that Ali actually put in during those year is RM60,000. This is only 38.1% of his total wealth. A total of RM97,553.35 is accumulated compound interest!!
Case 2
Saving for children education is a prime concern of most parents. When Abu is having his first baby, he has saved RM10,000 at that time. He put the money in a bank with an interest of 8% per year for his baby education. When the baby grew up and ready to enter university, Abu already has RM 50,338.34 as a result of his 20 years investment. See how RM10,000 can grow to 5 times its value in 20 years. Abu no need to worry about settling down his son education fee. But a lump sum of RM10,000 is too much for many parents.
Case 3
RM10,000 is maybe too much. To be more realistic, Zainab save RM100 per month for her baby education since she knew she is pregnant. After 7 years, her total saving is RM11,171.35. From that moment, she stops her regular saving and let the money grow by itself. When her child reaches age 20, the saving has grown RM30,381.87. This can be used to finance her child education at local university.
I have not earn my first wage from a formal job yet. So, I have no experience on how it feel to receive the first pay. At university, I work part time as a domestic assistant or cleaner. I cleaned university hall of residence and being paid almost equivalent to the national minimum wage. Most of the money was used to fund my travel around Europe. Anyway, that when I was a student, had no idea of saving and compound interest.
To calculate the compound interest of your investment, click here.
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