Over the years we have attended many local schools and presented financial seminars to Year 11 students on the fundamentals of managing money. What really amazed me was the reaction we would receive when handing out the following projection showing them the benefits if they were to start saving earlier in life. Silence would usually descend on the classroom and amazement as to how someone could put less away over a shorter time period and have more money in the future, as opposed to someone who has saved more over a longer term.
Albert Einstein called the deceptively simple concept the “greatest mathematical discovery of all time.”
Welcome to the miracle of compound returns.
How does it work, you ask? Like this:
- You earn some interest.
- Next year, you earn interest on that interest.
- The year after, you earn interest on the interest on the interest.
- The year after that… and so on…
Frances Easton CFP, M.FinPlan, B.Bus Acc, is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.