Put Savings in My Budget

So now you have cut back in your budget enough that you have a smidgen left that you are thinking about savings. That is terrific! There are lots of people who think they have to put literally thousands of dollars away into saving to get to where they want to be when they retire. But what most people don’t get told about or understand is that simply putting as little as $200 a month into savings can bring you just over $1,000,000 for retirement.

HOW you ask? This can be done through a concept many people are never shown or understand once they are told. This concept is called ‘Compound Interest’. What happens is you make interest on interest. How this happens is, you put your $200 into savings every month or $2400 yearly and then on the interest period, they add the interest to the base amount from before the interest is added. Then the added interest now becomes included in the base amount for the next period of interest. This makes the amount of interest you receive go up by the interest rate. As this progresses, you start making interest on the interest, on the interest and so on, making it compound over the years.

So what do I do with my money? Interest rates are basically non existent right now with regular savings accounts. I say this because inflation is up around 2.1% and regular savings account is only 0.5%. So leaving money in a regular savings account is a financial loss on a yearly basis. But you have financial institutions that know what they are doing and are capable of bringing you an average interest rate of 10%. This interest rate now allows, over the course of your working years, your smidgen of savings to provide you with the retirement amount you are looking for. Below is a table showing the total for each year that you would have: