Last Updated on 2022-10-05 , 10:01 pm
Every one of us hopes to have enough money by the time we hit 50 to retire like a millionaire. Or at least somewhere close to one. But a lot of us don’t even know how to start.
Well, we’ll let you in on a secret. And it’s incredibly simple: so simple, you wonder why you haven’t started on it yet.
Saving money. But hey, before you call me Captain Obvious, read on.
Then there comes the question. “How much should I be saving?”. Let me tell you this now to save you the surprise when your financial planner tells you the exact same thing. All you need is just $5 per day.
And depending on the kind of spender you are, you might want to open a bank account so as to consistently deposit these daily savings over without seeing them physically so you won’t be tempted to spend the money. Oh yes, and keep the ATM card at home. Don’t ever bring it out. If you can, don’t even request for one.
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Otherwise, if you feel you aren’t the type who will be tempted by the money physically sitting on your dressing table, you can start a piggy bank and slot in $5 every day.
If you do this religiously for 5 years straight, you should be able to see at least S$9,125 in that account or your piggy bank at the end of the day.
That’s a rather considerable sum but is it enough? No? Then read on. You need to understand why earning compound interest is important and how it’s more worthwhile than just putting aside a sum of money every day or every month in your physical piggy bank. With interest, the longer your money compounds, the faster it grows.
For the same figure of $5 a day saved in a bank, you’ll be able to have $9,689.17 in your account at the end of 5 years (calculated at 0.03%p.a.). That was a simple illustration of how interest can help your savings.
Do your own research and find out where’s the best place in town to put your money. And when we say best place, we mean places with the best interest rates and lowest risk as well.
Of course, be prepared to weigh your options because the higher the interest rate, the higher the risk. In a month you would have saved about S$150 and with, say, a 5% interest compounded each year you will be looking at a pretty nice figure by the time you’re 50. Even if not enough to retire on, you can at least semi-retire comfortable.
You need to remember this though. If you want to save any money at all with compound interest, you will need to ‘sacrifice’ a little bit upfront. Think of it as an investment for your future and towards a better life for you when you are older. All that money you have saved will not be for naught.
Now, do you suddenly fee the urge to save $5 a day…even though you know that you should be doing this ten years ago?
The real concept here isn’t the saving part, but the clarity part. You see, people won’t take action until they can see the end result clearly: if I’ve just said that you’ll have “some money by a certain time”, you won’t have saved even $1 a day.
But hey, using “$5 a day for $10K in five years” suddenly makes it more doable. Life coaches often encourage people to write goals like these so people would be motivated every day.
And if you’re interested, we thought of this when we heard about this “saving $10 a day” theory out there that’s guaranteed to make you a millionaire, or so they claim.
Just for clarity’s sake, you’ll have $36,500 in ten years (without factoring interest) if you save $10 a day. That’s a lot of money, isn’t it?
Featured Image: EWY Media / Shutterstock.com
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