Growing Money and Creating Wealth

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Growing Money and Creating Wealth

Investing money into the stock market is the best way to create wealth and achieve your long-term goals. When you invest, you can earn potential profitable returns through the following:

1.) Interest and dividends from a savings account, stocks, or bonds.

2.) Cash flow from business or real estate.

3.) Appreciation in the value of a stock, real estate, or any other asset.

The earlier you start investing, the more powerful compounding interest will be over the long-term. If you start investing at 20 years old by investing $100 a month at a 5% interest rate each year. After 40 years, this would grow to roughly $152,208. Assuming you now only invest for 30 years and 20 years, the long-term growth of your investment is substantially reduced to $83,713 and $41,663, respectively.

The power of compounding interest will benefit you the earlier your start. Let’s go through three different scenarios to show the power of compounding growth.

1.) John saved $800 a month for retirement beginning at age 25 and stopped once he turned 40.

2.) John saved $800 a month for retirement beginning at age 35 and stopped once he turned 50.

3.) John saved $800 a month for retirement beginning at age 45 and stopped once he turned 60.

In all three scenarios, after John stopped contributing, he kept his money in the account until he retired at 67.

All three of these investors invested $144,000 over a 15 year period.

Beginning Age	Balance at Retirement
Starts at 25	$1,363,136
Starts at 35	$663,651
Starts at 45	$370,579

I know saving this much per month may seem like a lot and hard to reach, but it could be easier than you know it. Most companies offer a match on your 401K contributions and it is always good to take advantage of this free money. If your employer matches up to 3% of your contributions, then you should be maxing this out and investing at least 3% in your 401K. This would result in a total contribution of 6%.

While there is potential for losses, there’s a bigger potential for long-term gains. Compounding interest is the best tool that a young investor has and you should take advantage of it.