Power of Compounding : Why now is the best time to invest
Since we went through the basics of compounding in my previous blog post, I wanted to take you through some calculations in today's post to help you appreciate the power of compounding. Don't worry, math is not as scary as it was in school.
We've all learnt right from school, the formula to calculate compound interest, right? But how many times have we applied this concept?
In the words of Warren Buffet,
“The best investment you can make, is an investment in yourself. The more you learn, the more you'll earn.”
Now let's say, you are ready to make (Example) :
An initial investment of Rs.5000
Monthly contribution of Rs.500, until the age of your retirement
Retirement age - 65 years (assumed)
Compound interest rate - 5% (compounded monthly)
If you invest at 20
Investment period : 45 years
If you invest at 25
Investment period - 40 years (25 years to age of retirement)
If you invest at 30
If you look at these calculations, you will realize that the difference between the principal invested at 30 and at 20 is only Rs. 60,000 (Rs.2,75,000 - Rs.2,15,000). However, the difference in the interest earned is Rs. 4,05,576.
I used the compound interest calculator from MONEY CONTROL to arrive at the above calculations. If you want to play around with the calculations, you can click on this link and do so.
The good news is that you will earn a lot more if you INVEST NOW, than 5 years later. Such is the power of compounding. Let's make the most of it and reap the benefits TODAY.
I hope this article has inspired you to steer towards investing for your future. When I worked around these calculations, I really felt bad for not investing earlier. But like they say, better late than never :)