I was introduced to the Power of Compounding after I read AhYap's blog one year ago. I was marvelled by this word 'power of compounding'. This word has been used by famous people like Warren Buffett, Albert Einstein, etc..
Let the number show you the wonder, see the picture below (click it to zoom):
As you can see, we assume that you have $100,000 in your savings. You can see the effect of growing the money at 5%, 10%, 15%, and 20% annually. By Year 20, those who grow their money at 20% per year accumulate $3.8 millions.Ah Yap keep on stressing that we must have $100,000 before the age of 30. Why? Because with the $100,000, even if you let it grows in the Amanah Saham 2020 account will yield you $386,968 after 20 years. If you think keeping it in the normal savings account (at about 3% annually), $100000 will yield just about $180000 after 20 years.
There are 2 main points that I want to stress here:
- Start saving early
- Compound you money smartly, don't just leave it in the normal savings account
I wish I can grow my money at 10% annually. I would be satisfied.
After 20 years, 100k will be 672k!
The power of compounding is really great. Now i realize how powerful it is.
I am teaching my little girl the idea of compounding interest. My hubby thought I am nut, but I believe it is never too young to learn. There are too many of us till today not aware of the power of compounding interest. If we are well informed, we will conclude that the "time in the market" is more important than "timing the market" I don't see this kind of thinking in many of my investors ..sigh...
the most powerful force in the universe is compound interest" - Albert Einstein
to punchliq,
10% is quite easy to achieve. Keep it up!
to John Biz,
It is good to realize. It is never too late to start saving.
to Jean Chai,
May I know how old is your little girl? Maybe you can instill a saving mindset into your little girl. I believe she can be very well financially in the future.