A Money Apple a Day...

An apple a day keeps the dentist away - isn't that how the saying goes?

I remember hearing this a lot as a kid. Not that my parents made me actually eat an apple every day, but the metaphor was clear - do something small each day (like brushing your teeth), and you won't have problems with your teeth.  Fast forward many years and I don't have any fillings or major dental issues, so it must have worked!

This isn't a post about dental health, yet the metaphor still applies - do at least one thing a day (even if it's something small like not getting that second cup of takeaway coffee), consistently, and you'll be way ahead of the game!

That leads me to the real point of this post - the power of Compounding.  It’s not sexy, or trendy, or even a new strategy, but it works.

You may have heard of the term "compounding interest". Do you know what it means and how it works?

Basically it means that you get paid interest on your total account balance, which includes any interest you've previously earned. So, you could look at it as interest on interest. It's pretty powerful. Let’s take a look at what happens:

Say you invest $1,000 and then save the following amounts consistently each month.  With a net interest rate of return is 5% (which can be the average of an investment rate of return) here is what you will have over time:

That’s quite a nest egg you would have, without too much sacrifice!

While the rate of return is important (the higher the interest rate the faster your money will grow or compound), it is also the act of consistently putting money away that's vital.

It's a good place to start, and once you have money set aside, you then have the choice of what to do with it - meaning you can begin investing and potentially taking on some risk to increase your return (risk and return generally go in the same direction together).

How do you go about doing this? You can either do your own research into investments, or, go to a financial planner (a proper one that doesn't just sell you into a managed fund) to help you design a plan to suit your needs and risk profile.

The point is, with compounding and consistently putting money aside, you have CHOICES as well as MONEY, which will get you closer to your desired lifestyle faster!