Only 32% of you have the inside word on a great tool that can set you up for $$ success – “compound interest”. It’s no gimmick. Compound interest is potentially something you’ve heard before, but if you’re a sceptic or haven’t grasped its powers... be prepared to set your future-self up for success.
What is Compound Interest?
Earning interest on your interest. When you have money in a savings account you should be earning interest, and typically it’s paid into your account at the end of each month. So the next month you earn interest on both the money you put in the account + the interest you earned for last month and all previous months. See, you earn interest on your earned interest.
The power comes from starting to save and invest smaller amounts early to reap the rewards later in life (without impacting your lifestyle too much now). Words aren’t the best at explaining its power, so check out the video ⬇️.
Take control of your future
For so long, in NZ in particular, we’ve lived in a rosy world where houses were affordable if you saved hard, retirement at 65 with a government pension, and a relatively reasonable cost of living.
Now, we face a future where homeownership is becoming more and more unattainable, retirement age is increasing and the pension likely to be replaced by your KiwiSaver savings. This weighs heavily on our minds, particularly millennials as 64% are experiencing financial stress.
We must create financial independence for ourselves in order to live the lifestyles we deserve and that we’ve worked for. One key way to help make sure you get to live the life you deserve is investing with compound interest in mind.
We’re not saying investing is everything, we all want to have a good time. However, it is important to strike a balance — to make sure you’re having a great time now and also in the future.
The 4 steps to make compound interest work for you
- It’s not so much about the amount you save, its that you start saving…
- Start saving early (video ⬆️ shows the power of starting early).
- Add money on a regular basis. Say every payday.
- Don’t touch, or try not to, dip into it. Time & patience are the friends of compound interest.
The sooner you start, even with a little $, the more $$$ you make 🤑.
Looking after the future you—10x better
The real benefit of compound interest in this example is the sweet lifestyle and/or retirement you can create, think travel, the bach, whatever your dreams—compound interest is there to help you achieve it.
Where to find compound interest?
- Any bank account that earns interest (typically savings accounts)
- Term Deposits
- Shares (reinvesting dividends has a similar effect)
A quick warning, when in debt (credit cards, personal loans etc) compound interest is working against you—hence why they say pay down debt quick.