The Dynamic Power of Savings and Compound Interest
When it comes to affording big, extravagant purchases, sometimes It’s hard to stomach the amount. But, that doesn’t mean you have to spend all of that money right here, right now, and have nothing to your name. How can you afford big purchases, such as a home, a vacation, or even retirement? Well, one of the best ways to do so is by saving money, and compound interest is actually your friend. Putting money into a savings account, letting it accrue interest, and the like is actually an awesome thing to do, and this article will highlight the benefits of it, and how compound interest plays a part in this. Savings and Compound Interest is the most practical and powerful way of increasing your net worth.
Helps with the uncertainties of the world
The world is a place with a lot of changes. Who knows what the government might pull, or even what might happen to you next? These uncertainties are never fun to deal with, but did you know that you can fortify yourself against them by saving money?
Saving money has the benefit of helping with the uncertainties by doing the following:
• Prepares for disasters
• Relieves stress
• Gives you a sense of grounding
If you do end up having an emergency, it can be super terrifying if you don’t have the money for it. If you don’t have a little bit of savings set aside, it could mean a huge blow to your finances. But, if you do have savings, and you save money, you can prepare for the worst, which is actually really nice. If you’re someone who likes to plan, you should definitely always plan for the worst, and fortunately, savings and saving money do that for you.
Savings do link to Happiness
Did you know as well that savings and saving money can link to happiness? That’s because of the fact that it gives you a chance to plan.
When you save money, it actually can give you a chance to think ahead on this. For example, you can use the money for the following:
• Setting goals
• Taking steps towards a goal
• Preparing for the worst
• Making dreams come true
Do you have dreams? If the answer is yes, chances are they need to be accomplished with a little bit of help with money. Those who save have a more “planning” sense of mindset, where they plan a set of steps before they end up achieving them.
Have Goals and a Plan
If you have goals, you tend to have a reason to keep on working towards them, and you feel way better as well.
There is also a strong relationship between spending and saving money and having some emergency funds. If you’re planning a better life for yourself, and maybe they’re a dip, such as maybe you need to get a car fixed or an accident happens, chances are you’ll feel less stressed if you have a decent amount set aside than for those that don’t have a plan.
It does make a huge difference, and while there are a lot of people who claim that they can’t save money, there are always ways to. If you’re spending money on frivolous things for yourself in some way, shape, or form, you can plan that money for an emergency fund. It doesn’t even have to be a ton either. Lots who save tend to put about ten percent of it away, and it does make it much easier on you if you do have a plan.
More Control over Money
Now, this ability to feel happier is attributed to the sense of control. People like to feel in control when it comes to things. Lots of people don’t like to feel like they’re out of touch with the way things are going. They want to have some sort of plan. Those who don’t have a plan tend to let caution be thrown to the wind, and that can be dangerous. The chaos can end up creating a mess for yourself and for others.
But, if you plan ahead, and know what you’re going to get done, and what you want to do, you’re going to feel more control over your life.
Control isn’t necessarily a bad thing. By having more control, you’ll end up feeling the following:
• Much more happiness
• A better coping mechanism when stuff goes bad
• A feeling of reliance when stressed
• Overall better results when you do end up getting a job done
Many people who aren’t in control, tend to find themselves much unhappier than those in control. If you’re not in control, think about it, can you make the changes that will affect your life in a much happier way? Do you feel like you’re able to get through the hustle and bustle of everyday life if you’re sitting there unsure of what the heck you’re going to do next? It’s probably much harder for those who don’t actually spend time planning this. It definitely allows for more control, plus if something does go awry, you’ll be able to save some money as well.
A Sense of Accomplishment
Some people say that it’s not the destination, but the journey itself, and when it comes to saving money and achieving goals, this can be a big thing.
Think about it, if you’re able to get what you want, does it feel as fulfilling as if you work hard, save money, prepare for it, and then do it? Sometimes, saving money is a huge factor in it.
Lots of people have goals. Maybe they want to own a home, or they want to go out of the country. Those things do cost money, and you do have to save for it. However, by following the right steps, such as the ones below, you’ll be able to achieve it.
• Set a plan
• Put a little bit away
• Consider a savings account or an investment
• Start to put a little bit of extra money away
• End up saving towards your goal
Now some people say do the ten percent thing. If it is physically impossible for you to do, or maybe stop excess purchases, one way to end up achieving this goal is through investing. For example, if you put it in a CD or even stocks, you’ll be able to invest it and achieve a larger sum of money as a result of this. If you encourage this, you’ll definitely be able to do something with this.
And even if it is just moving towards putting money aside to pay off debt, it can make a huge difference in your life. Think about it, wouldn’t it be awesome to pay off that credit card debt, or whatever it is? You don’t have to immediately, but saving money and putting it in other areas can change your life.
How compound interest plays a Part
One way to actually save money in some ways is to use compound interest. Now, this can be your friend or your foe.
It’s a foe when it comes to owing money, such as in the form of loans that you might have. In those cases, you want simple interest.
Compound interest is essentially an interest that’s compounded a certain number of times within a period. For example, the interest is often compounded maybe biannually. So, twice a year it adds that interest to the investment. You obviously don’t want this when you’re trying to pay off a loan, because then you’re going to be swallowed in debt.
But, when it comes to saving money, it can be your best friend. Often, this is utilized in a much more positive way than loans and debts, such as the following:
• Savings accounts
• Certificates of deposit
• Stocks
• Investments that are reinvested
All of these love to use compound interest, and they benefit from it. It’s amazing for interests, and it should be encouraged, but you avoid these like the plague when it comes to loans for obvious reasons.
Compound interest is something that’s been around for a long time as well. You might wonder if this is something new, but in fact, it dates back to the Islamic and Christian texts of old when it came to using this. It actually is a substantial part of finance, but it was often used in a bad way originally, such as interest on loans, but it eventually started to move toward more positive uses, such as savings and the like.
It is something that is lauded in this day and age, and if you’re using it right, it can be your best friend. Compound interest is the best wait in some cases to save money because you’re not doing jack with it, so you can essentially let it sit, and from there, it’ll grow.
The Benefits of Compound Interest
So how can it be your friend? Well, there are a few benefits worth highlighting, and a few that you can definitely get a lot from.
Some of them include the following:
• If you give it time to build, it leads to a lot of wealth
• If you have more periods, it will grow to huge returns
• You don’t have to worry about the money, or manually watch that you use it
• It doesn’t matter if it’s short-term or long-term, you can use compound interest
That’s right, even if you’re just putting it in a savings account with a low rate, it can change things. For example, let’s say you’re constantly building your savings in the long term. You might end up looking at your balance, which might be compounded quarterly, and it might be a whole lot more. It can lead to wealth, and it does build up a huge amount of returns. You’re earning money simply by the interest being put on the money that you possess.
That’s right, this is your money. It’s not somebody else’s.
So, let’s take an example. You decide to invest ten grand into a 30-year investment. The interest is compounded annually at five percent. So, you wait about thirty years, don’t even bother touching it, and from there, you take a look when the money is free.
How much interest accrues on this? well, about 33 thousand dollars. That’s right, if you do this with compound interest, you actually will get a ton of money. It’s amazing what it can do. For many people, if they just put it in a CD that compounds annually, they will end up getting a whole lot of money.
So, what about simple interest? Simple interest only happens once, and at five percent, that’s only 5 thousand dollars, so you’re left with 15 grand. As the compound period increases, along with the interest rate, and even the principal that you put in increases, so does the value of this.
You don’t have to do anything, just put it in there, and it will do the work for you. It’s one of the best ways to save for the long term. Plus, while the initial investment might be a lot, it can truly benefit you if you don’t even touch it.
So, consider putting together that nest egg. Consider maybe slowly accruing this. open up a savings account and put ten percent, twenty percent, or whatever you can into there. Start to continuously grow it. I do suggest if you get money as a gift, even put it in the savings account. You can make this grow, and while you do have to live in the here and now when it comes to bills, sometimes, by creating a savings account, using compound interest, and just saving period, you’ll feel way better about yourself, more in control, and overall way happier as well.
We all want to be happy, right? Do you want to feel like you’re actually working towards something, right? Well start to take charge of your life, and put together that savings account, and from there, it can majorly benefit you in ways that you never thought possible.
Don’t forget the Stock Market
Why you should invest in the stock market
When it comes to where your money goes, some people might say investing in stocks is the way to go. But why is that? Why would you consider investing in stocks? The stock market fluctuates A LOT and you might wonder if you’re going to lose out on money. Well, you will if you don’t avoid the pitfalls, but if you do watch for this, it’s actually a super remunerative form of making long-term income. This article will discuss why you should invest in stocks and the power of compound interest on these stocks. Click here to read our article on Stocks.