Power of Saving & Compounding

I wish I had the wisdom to understand this when I was 25 years old. Please read and share with your children.

Let's say you just graduated from university at the age of 25 and you got your first job that pays you RM2,500 per month.

Scenario 1:
You work hard and save RM1,000 per month. At the end of the year you had saved RM1,000X 12 = RM12,000. The following year you keep the money in the bank that gives you an interest of 4% per annum. For some reasons, you become lazy and stop saving. When you are 36 years old, you would have RM17,800.

 

Scenario 2:
You work hard and save RM1,000 per month. At the end of the year you had saved RM1,000X 12 = RM12,000. The following year you invest the money in a vehicle that gives you an interest of 10% per annum. For some reasons, you become lazy and stop saving. When you are 36 years old, you would have RM31,100.



Scenario 3:
You work hard and save RM1,000 per month. At the end of the year you had saved RM1,000X 12 = RM12,000. The following year you keep the money in the bank that gives you an interest of 4% per annum. You are hardworking and continue to save RM12,000 every year. When you are 36 years old, you would have RM161,800.



Scenario 4:
You work hard and save RM1,000 per month. At the end of the year you had saved RM1,000X 12 = RM12,000. The following year you invest the money in a vehicle that gives you an interest of 10% per annum. You are hardworking and continue to save RM12,000 every year. When you are 36 years old, you would have RM222,400.



The four scenario above highlight the importance of  saving and compounding your money.

The reason it was simulated until age 35 is because that is the 10th year of working.

What scenario would you want your children to be in after working for 10 years?