Create Income From Your Investments
Receiving income from your investments is the most amazing thing. Growing up, I was required to save 50% of all the money I earned. This was held by my family, who paid an 8% interest rate. I had the option to reinvest the money or get a check every year. I, of course, took the check. I did not see compounding interest in doing this. However, I quickly learned about making my money work for me. I recall getting a check for $150-$250 every December. I usually didn’t have much left in January, but it definitely taught me the importance of interest.
Investing For 10 Years $250k
Taking the $1,872 that you put into your retirement plan by saving 3% of your pay and receiving the 3% company match, I put together an example of what compound interest can do for you.
Billy starts when he is 30 years old and puts $1,872 in his retirement for ten years. Unfortunately, life has happened, and he is not able to contribute for the next 27 years. Billy will have put a total of $18,720 into his retirement plan, and at the age of 67, with an 8 percent interest rate, he will have just over $250,000. Billy stopped putting money in his account, but his money did not stop working for him, earning him interest.
Investing For 28 Years 200k
Frank gets started a bit later. However, he still has plenty of time. He adds $1,872; however, he saves for 28 years instead of 10. The total amount Frank saved is $52,416. At the age of 67, his retirement account is now worth $192,752, assuming an 8 percent interest.
Billy saved 36% of what Frank saved, yet he has $59,000 more in his retirement account. This shows the importance of starting early, even with a small amount. Also, let’s say you leave your job and you only have several $1,000 in it. Please don’t take it out because it seems insignificant. It will add up in 30 years, with 8% interest, you will double your money every nine years. You should roll it into an IRA.
