I Dare You To Save
$52.73. That’s how much spare change my husband and I accumulated last year in an old 5 gallon water bottle. May not seem like much to you, but it was enough to consider where to put it: Purchase stock? Deposit in savings? Dinner for 2?
If we had purchased 1 share of Walmart stock ($49.44), we would have made a couple of dollars seeing the stock has risen since then.
If we deposited the money in a savings account, we would have made a whopping $0.43 on the investment.
If we went to dinner, we both would have been full, but empty handed.
I used to think that saving was difficult, but the power of compounding interest has changed my mind.
2 factors always work with compounding interest, time and rate. Your rate will tell you how much and time will tell you how long. Put both of them together along with your initial principal amount and it will make you some interest which will make more interest, which will make more interest…get it? It’s a snowball effect, but it doesn’t work if you don’t work it. You can’t take the money out because your shoes are finally on sale or they won’t offer this sale again for another 6 months. It only works when you allow it to snowball.
Here’s an example:
Just watch the numbers grow.
Year 1:
$100 x 10% = $10 interest. Running Total: $100 + $10 = $110
Year 2:
$110 x 10% = $11 interest. Running Total: $110 + $11 = $121
Year 3:
$121 x 10% = $12.10 interest. Running total: $121 + $12.10 = $133.10
Year 4:
$133.10 x 10% = $13.31 interest. Running total: $133.10 + $13.31 = $146.41
Year 5:
$146.41 x 10% = $14.64 interest. Running total: $146.41 + $14.64 = $161.05
Year 6:
$161.05 x 10% = $16.11 interest. Running total: $161.05 + $16.11 = $177.16
Year 7:
$177.16 x 10% = $17.72 interest. Running total: $177.16 + $17.72 = $194.88
Year 8:
$194.88 x 10% = $19.49 interest. Running total: $194.88 + $19.49 = $214.47
It would take at least 8 years to double your money. Of course this is with no additional deposits or increase in rate. The easier way to figure how long it would take to double your money is through the rule of 72. Divide 72 by your rate and the result will be the number of years it will take your money to double. For example 72 divided by 10(10%interest rate) = 7.2 years to double your money.
Ways to invest an extra $50:
-Open an account at Sharebuilder.com or Buyandhold.com ; there are loads of stocks for under $50 and some even pay dividends
-Open a 529 Savings plan for your kids college education; most require only $25 to start and it’s tax deductible
-Use extra money to pay down credit card debt; the more you pay off now, the less interest you’ll pay later
-Buy a Savings Bond; they are exempt from state and local taxes
-Deposit in a savings account that compounds daily and monthly
Whatever you decide to do with your spare change is exclusivley up to you, but don’t wait.
Don’t get in the habit of thinking these thoughts:
I don’t have enough money to invest
I’ll wait till my next check to start.
I have too many bills
I’m too old to invest
I don’t know anything about investing
It sounds too complicating.
I don’t have time.
All these are just excuses, there is never a time when you CANNOT invest. Start today, start now and build your future. Start by bringing your lunch, passing Starbucks or by passing the mall this week.
Don’t complain that you don’t have enough, or you never will. Believe that you CAN be financially independent. I challenge and I dare you to save your next dollar.
Don’t wait until the next time, it may be that next time is not waiting on you.
Rhonda L. Nails is the Founder of Monarch Developments, LLC. She is also author of the bi-weekly newsletter, The Monarch Message which is written to empower individuals to get smart and savy about money.
Visit her at
http://www.squidoo.com/beerandyoung
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