Sunday, May 2, 2010

Become a millionaire with the power of compound interest

What is compound interest ? It means interest earned both on the principal amount and on the interest earned in previous period. To be a millionaire is every one dream. With the initial amount of RM 60000 and 10% return rate per year and in 30 years, you will have more than 1 million. That is the power of compound interest.

Based on this spreadsheet, we can notice the power of the compound interest and the important of start saving at the early year and invest on the investment tools that provide higher return rate.

The example shows that to have one million when you reach 55 years old you can have different method. The initial amount of money that you need varied a lot depends on the investment return rate that you get.

With 10% investment return rate per year and 30 years time, the initial amount of money you need is RM 60000 in order for you to be a millionaire. Compare with the investment with 4% return rate (Example could be 1 year fixed deposit), using the same amount of time that is 30 years, the initial amount of money you need is RM 310000.

Knowing the power of compound interest and utilize it wise will help you to become a millionaire.

Take 30 years and when you are 55 years old to become a millionaire might not what you want tough. Hence to accelerate and shorten the year. Invest and look for the investment tools that have higher return rate is definitely a 'Must" for all of us.

Ask yourself when you you need to be a millionaire than you will know what is the initial amount and the return rate that you need to achieve it.

So what is your target age to be a millionaire, 30, 35, 40 or 55, how much cash on hand that you have now or you don't believe of the power of compound interest ?



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Was established since 20th Rejab 1430.
Just to educate myself.
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