Starting to save money early can make a large difference in savings down the road. At an annualized 5% interest,
$100,000 gains over $400,000 over 50 years.
Save as much as you can now and invest it wisely. Inflation will likely raise prices of goods and services into the future so be prepared for this when investing your money for long term goals for lifetime financial growth. The time value of money is real: what matters most is how much you get back out compared to how much you put in. Be wary of high-risk investments; if something seems too good to be true, then it probably is. Lastly, don’t forget about taxes! If you are using a broker, they are likely charging you fees and buying or selling at the wrong times can lead to higher capital gains taxes.
This is accurate only if the interest rate never changes while calculated over periods greater than 50 years. If your money compounds more frequently, interest payments will be higher which may alter the amount of compounding.
Don’t keep all your eggs in one basket! The saying ‘don’t put all your eggs into one basket’ simply means do not keep everything you have in one place! This especially applies to savings accounts: by keeping too much money in low-interest online savings accounts it could mean losing out on thousands of dollars due to inflation. By instead investing that money somewhere else with higher interest rates, you could potentially be earning that money back! For example, $100,000 invested into a high-interest savings account at 5% interest with annual compounding over 50 years would have grown to just about $300,000. Since the rate of inflation is likely higher than 5%, perhaps 6% would give a better estimate of what the money could actually buy in the future. However, by using this same amount and investing it into stocks at an average growth rate of 7% per year (which is lower than historical averages) your capital sum would grow to nearly $1 million (assuming no change in stock prices)!
Make sure not to fall for common consumer traps! Sometimes people see or hear about something that ‘sounds’ too good to be true, and it probably is. Be wary about claims of being able to make money fast or easily! It takes hard work and time to earn money, especially if you are working for yourself! Understand the difference between an asset and a liability. Assets put money in your pocket while liabilities take away from it. A house may be considered an asset but only if you have debt-free ownership (i.e., no mortgage). If you need help understanding the concept of assets versus liabilities, check out this article.
Don’t forget about government benefits such as tax exemptions, credits, deductions, benefit withdrawal transfers, etc. Most importantly don’t forget about CPP contributions because they take a chunk out of your paycheck early on. You can get back some of this money either through monthly payments or lump-sum tax refunds.
Look for ways to make more money such as adding multiple income streams or picking up odd jobs (i.e., yard work). Do what you love to do and you’ll never feel like working! If you are passionate about something, then it is likely that you will excel in that area: whether it’s teaching others, writing a book, creating art, photography, etc.
Lastly, DON’T FORGET THAT THERE IS MORE TO LIFE THAN MONEY! Money is not everything and unless you plan to become a hermit, you will always need other people. Whether it’s the love of a significant other, your family or friends, don’t forget there is more to life than money!
Thanks for reading, you learned 6 tips to help grow your money as well as knowledge about what happens when money compounds and the difference between assets and liabilities! Remember, always make sure you are well-informed before making a financial decision and if in doubt, reach out to experts such as accountants or people working in the investment industry! try to learn better and more about lifetime financial growth and savings! So that you will be tension free in your old age.
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