Here is excellent advice on why you should START TODAY!

*“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who does’t … pays it.”* Albert Einstein

And it is Warren Buffet, one of the world's greatest investors, who has used this "eighth wonder of the world" to create his fortune.**Surely you should use it too?**

That is

That interest is then added to your amount (capital) and you then earn interest on that capital amount, **plus the interest it earned.**

That is **Compound Interest** - earning interest on interest.

Using the principle of Compound Interest, your investment grows way faster than with Simple Interest.

And just think of the power it has over a longer-term investment.

**As your investment grows, so too does the effect of compound interest.**

It's like a snowball rolling downhill, starting small, but as more snow is added, the bigger it gets.

And the bigger it gets, the more snow it gathers.

**So even without you actually adding to your investment it grows faster and faster!**

**Year One:**Your initial deposit (principle) of R 1,000 earns 5% interest per year, or R 50, resulting in a balance of R 1,050 at the year end**Year Two:**Your R 1,050 earns 5% per year interest again, or R 52.50

Your balance now is R1,102.50.**Year Three:**Your balance of R1,102.50 earns 5% interest per year, or R 55.125. Your balance grows to R 1 157,63 and so on ...

This presumes an interest rate that is compounded every year.

**But most banks compound interest daily - so your investment grows even more quickly!**

And that can multiply very, very quickly!

Jane and Sipho start working and earning an income.

**Jane (age 24) decides to invest R 2,000 per year into a unit trust - one of the finest investment you can make - and keeps it going till she is 30 years of age.**

That investment grows by 12% (after costs and taxes).

She then** stops contributing**, and leaves the investment as is, earning say, 12% each year until she is 65.

**Sipho decides to enjoy life and invest later. He starts saving the same R 2,000 per year but he at age 30 - 6 years later than Jane.**

The investment is identical to Jane's in returning 12% (after costs and taxes).

Then Sipho **continues adding** R 2,000 per year to his investment until the same age as Jane, 65.

**Jane invested R 2,000 X 6 years = R 12,000 and got R 959,791 age 65.**

**Sipho invested R 2,000 X 36 years = R72,000 and got R 1,085,197 age 65.**He saved that amount for 36 years - over Jane's 6 years.

Another way to look at it is that, **the 6-years Sipho waited before starting to save, cost him R 60,000!**

**Unbelievable, but true!**

You cannot buy back lost time!

Medical aid pays healthcare costs.**What if a disability STOPS your income?****Peter Pyburn - Authorised Financial Services Provider**, fully licensed to render financial services since 1991. Death and Disability Planning; Retirement Planning; Investment Planning; Healthcare and Estate Planning. **More...**

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Last update: October 4, 2024