Building Wealth Starts When We’re Young
Time Equals Wealth
Thanks to compound interest, the quickest way to grow your bank account and make a million bucks is to start saving and investing at a young age… If two people make the same initial investment at the same interest rate, but one invests 20 years earlier, the individual who started young will make substantially more money in interest, even if the person never contributes additional funds. The longer you invest your money the more profit it will make.
For example, if you save $2,000 at a five percent annual interest rate you will make about $100 during the first year of savings. In the following year, your new balance of $2,100 will earn $105 dollars in interest. Over time this pattern can equate to great savings. In 14 years your initial investment of $2,000 will double if left untouched. Time equals wealth. You just have to make the effort to start as young as possible.
If you’re not convinced of the magic power of compound interest, consider this: an annual contribution of $1,200 (or $100 a month) at a one and a half percent interest rate will grow to $60,000 in 37 years. The same investment plan over a period of just four years will yield an increased balance of $5,000. The longer you let your investment earn interest, the better.
You can use the following compound interest calculators to help you devise a savings plan:
- Compound Interest Calculator from Investor.gov
- Compound Interest Calculator from MoneyChimp.com
- Compound Interest Calculator from Bankrate.com
Finding the Right Savings Account
When determining which bank to open your savings account with there are a few things you should consider.
- Intro rates: Obviously, the goal is to find an institution with a high interest rate. However, be aware of the “intro rates.” Often a bank will advertise one interest rate and then add in the fine text that this rate is limited to a three, six or 12 month introductory period. After that, you will typically accrue interest at a different, lower rate.
- Minimums: Every account has a minimum to open. The minimum is typically $100 dollars and can go as high as $50,000. On some accounts if your balance drops below the minimum there will be a fee.
- Check writing: Do you need access to the funds in this account? If you have no other emergency funds available, you will need to withdraw money from this account when you need cash. Ensure the account that you select has the ability for withdrawals.
- Fees: Banks are notorious for their fees. Common bank fees include an early account closure fee, monthly/annual maintenance fee, minimum balance fee, returned deposit fee and paper statement fee. The only way to avoid being nickeled and dimed is to read the fine print.
Use the following websites to check for updated savings and checking account interest rates:
- Today’s Highest Savings and MMA Rates by Bankrate.com
- US Consumer Interest Rates by Bloomberg.com
- Savings Accounts Rates by Nerdwallet.com
It’s never too late to being saving. Whether you are 18, 25, 45, 70 or somewhere in between, you can research savings accounts and begin making monthly or annual contributions to grow your interest and overall investment.
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- Steps to Building Wealth, by Bankrate
- 3 Simple Steps to Building Wealth, by William Artzberger
- Build Wealth and Start Young, by ezinearticles.com
- Three Steps to Wealth Building for Young Adults, by Dave Ramsey
- How to Build Wealth While You’re Young, by Amber Spencer
- How to Build Wealth with Time on Your Side, by Dave Ramsey
- Lost Generations? Wealth Building among Young Americans, by urban.org
- How to Build Wealth from a Young Age, by parkrosa16
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- EveryDollar Rant, by Dave Ramsey
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- Education, Ideas and the truth for the Wealth Builder within you, by grantwealth.info
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- YoPro Wealth: Take Control of Your Finances, by Austin Netzley , available on iTunes for free
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