Concept of saving and investing

Because you are young – you have a very big advantage and that is you have a longer time to save money and then invest that money into different asset classes (don’t worry I will explain this later)
So if you start saving early in life then the what is called the magic of compound affect (will explain this below) will help you extremely well
The secret to saving a million dollars is to save as much as possible for as long as possible earning a high interest rate that is compounded frequently – this will be explained in more detail below
The basics of saving for a how much money you would like is as follows
i. Save often and start as young as possible- concept of compound interest
ii. Try and save as much as you can – (rocket your savings)- concept of budget introduced
iii. Open a bank account that offers the best features
iv. Do not withdraw any money from the account and track your progress on your Income statements and b/sheet – set your 1 million dollar target
v. Grow your portfolio by including not just saving money- concepts of assets classes. These are shares, property, fixed interest and cash. By including each of these asset classes in your investment portfolio, you will reduce risk and volatility

i. Save often and start as young as possible- concept of compound interest
Saving is really not spending money you receive today to be able to buy things in the future- so instead of buying all the new toys that you get your hands on – by saving you wil not buy all these toys and rather save for the future when one day when you can buy something that will generate money for you.
I need to explain the concept of compound interest – what is compound interest – it is a magic formula – it is quite simply when you deposit money into the bank say $100– the bank will pay you interest on this $100 that you deposited – and if you leave this money in the bank the bank will pay you not only interest on the $100 but also interest on the interest you have earned- that is compound interest – it is the accumulation of interest on interest
I will show you by way of an example
You deposit $100 into a bank account which pays you 5 % interest per year
At the end of the first year you will earn $5 in interest (5%*$100) and your total savings will be $105
At the end of the 2nd year you will earn interest of $5.25(5%*105) and your total savings will be $110.25 ($105 at the end of year 1 plus $5.25 interest earned from year 2 =$110.25

If you keep doing this the balance on which interest is calculated grows and your interest the bank pays you for depositing your money grows- how long will it take you to get to a million dollars? Let me show you

Say you opened a savings account and your parents gave you a birthday gift of $500 – you took that $500 deposited into a bank account paying 5% interest and put $160 per week away into this bank account you will have $ 1 005 589 in the bank account after 39 years- but the magic of compound interest has worked wonders as you have only put in $324 980 ( $160*39 year s*52 weeks in a year plus your initial deposit of $500 = $324 980- You have earned a massive $680 609 in interest due to the wonderful world of compound interest