Trying to control my excitement this afternoon in staff meeting. Just as soon i have gone through the weekly agenda, i pulled up the Compound Interest Formula to the projected screen. A 10 minute effort before the meeting started while i was waiting for everyone to arrive.
"I like to show something to all of you today. Here's the formula of compound interests for $1000.
Year 1, 3%, $1030 ...
Year 5, 3%, $1159 ...
Year 24, 3%, $2033
Your money just grow and doubled just with 3% annual compounded after 24 years. Now think it this way, if you do nothing with your money and let the inflation monster eats them 3% annually. Yes you still have $1000 absolute on paper but you are actually left with only $481 in real material term that you can use.
Compound Effects are double edge sword. Doing nothing is quite a damaging no action move. What can make this worst ? A saver who holds $1,000,000 for 24 years. The effect is multiplied 1000 times up / down according to her action. ( In-between if saved overtime ). If you are a super passive saver, you are just working your ass off to fight inflation in your twilight years to Save your Saved. You aren't Saving.
Step back from your work and think for a moment. "
Two of them walk off before the session ended for another meeting. One excited. Two others not sure...
Maybe i should try again ...
Cory
21st May 15
"I like to show something to all of you today. Here's the formula of compound interests for $1000.
Year 1, 3%, $1030 ...
Year 5, 3%, $1159 ...
Year 24, 3%, $2033
Your money just grow and doubled just with 3% annual compounded after 24 years. Now think it this way, if you do nothing with your money and let the inflation monster eats them 3% annually. Yes you still have $1000 absolute on paper but you are actually left with only $481 in real material term that you can use.
Compound Effects are double edge sword. Doing nothing is quite a damaging no action move. What can make this worst ? A saver who holds $1,000,000 for 24 years. The effect is multiplied 1000 times up / down according to her action. ( In-between if saved overtime ). If you are a super passive saver, you are just working your ass off to fight inflation in your twilight years to Save your Saved. You aren't Saving.
Step back from your work and think for a moment. "
Two of them walk off before the session ended for another meeting. One excited. Two others not sure...
Maybe i should try again ...
Cory
21st May 15
Those who are already invested then Patience is one of the key essence going through the compounding route.
ReplyDeleteAgree; for those sitting at the sideline far too long of time that they can really better off putting their funds to work and not belittling or be ignorant to the compounding effect of it.
Yup. Many people do not understand that cash is to be manage not keep. There's need to be a plan.
ReplyDeleteYup agreed! So whilst we keep a portion invested, the "cash holdings" for emergency fund/war chest could be parked in FD/SSB Bonds. That's better than nothing haha.
ReplyDeleteTrue. For Warchest fund, I will need to draw them during poor market time which won't suffer capital loss or minimal.
ReplyDelete