{"id":2581,"date":"2017-10-09T08:07:13","date_gmt":"2017-10-09T06:07:13","guid":{"rendered":"https:\/\/contattolive.co.za\/north\/?p=2581"},"modified":"2017-10-01T22:06:02","modified_gmt":"2017-10-01T20:06:02","slug":"power-compound-interest","status":"publish","type":"post","link":"https:\/\/zcp.co.za\/main\/power-compound-interest\/","title":{"rendered":"The Power of Compound Interest"},"content":{"rendered":"<p style=\"text-align: justify;\">Many South Africans are unfortunately ill-prepared for retirement, and it\u2019s an unsettling prospect that so many citizens of this developing nation may not be able to support themselves in their golden years.<\/p>\n<p style=\"text-align: justify;\">However, the beauty of compound interest means that if you start saving from an early age, investing in your future doesn\u2019t have to be the heavy financial burden that many people fear (and thus postpone). The power of compound interest actually makes saving from an early age much cheaper and less stressful than if you were to put off saving until you\u2019re older.<\/p>\n<p style=\"text-align: center;\"><strong>Albert Einstein referred to compound interest as \u201cthe greatest mathematical discovery of all time\u201d, and he declared it to be \u201cthe eighth wonder of the world. He who understands it, earns it &#8230; he who doesn&#8217;t &#8230; pays it\u201d.<\/strong><\/p>\n<p style=\"text-align: justify;\">In a recent <a href=\"https:\/\/www.cnbcafrica.com\/news\/2017\/07\/20\/power-compound-interest\/\" target=\"_blank\" rel=\"noopener\">article published by CNBC Africa<\/a>, the power of compound interest is explained with the following example.<\/p>\n<p style=\"text-align: justify;\">\u201cBased on a growth rate of 10% per annum, if one saves R1,000 a month, the capital amount after 20 years would be R759,300. If one saves R1,000 per month for 40 years, the value would be R6.3 million\u2026 The total contributions for the client who saved for 20 years was R240,000 and the contributions of the client who saved for 40 years was R480,000, yet the difference in their values at retirement was a massive R5.5 million.\u201d<\/p>\n<p style=\"text-align: justify;\">This is because compound interest is the interest calculated on the initial principal, compounded with accumulated interest. It is essentially the result of reinvesting interest so that interest is then earned on the principal sum and previously-accumulated interest combined. To put it simply, it can be thought of as \u2018interest on interest on interest,\u2019 and it will make a sum grow at a faster rate than simple interest, which is is calculated only on the principal amount.<\/p>\n<p style=\"text-align: justify;\">The company that you work for may make monthly contributions to your retirement either in addition to your wage or through salary sacrifice. According to the article, if \u201cyou begin with your company retirement fund at age 25, then 19% of your salary should be sufficient should you continue with this for the next 40 years and not cash-in your funds on resignation or retrenchment, but rather preserve them. Should you start working later, then you would need to invest a higher percentage of your salary to compensate for your lack of compound growth in previous years.\u201d<\/p>\n<p style=\"text-align: justify;\">Time is of the essence when it comes to taking advantage of the effects of compound interest to build a healthy savings pot that will provide for you in your autumn years, as well as potentially allow you to support your children with their financial goals. The bottom line is that the longer you wait to start saving, the more money you will need to save to achieve the same financial goal. And this is particularly the case when it comes to retirement savings, as this could benefit from a 40-year saving term.<\/p>\n<p style=\"text-align: justify;\">The power of compound interest lies not in saving vast amounts, but instead when you start saving. Don\u2019t underestimate its power, and don\u2019t hesitate to arrange a meeting to find out how much you need to save per month to reach your retirement goals. Calculations will be based specifically on your current age, desired retirement age, and future requirements, so don\u2019t delay in making compound interest work for you.<\/p>\n<p style=\"text-align: justify;\">Please note that all figures in this post are average examples and don\u2019t represent an actual financial plan. Each plan is unique and needs to be tailored inside of a host of influencing factors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many South Africans are unfortunately ill-prepared for retirement, and it\u2019s an unsettling prospect that so many citizens of this developing nation may not be able to support themselves in their golden years. However, the beauty of compound interest means that if you start saving from an early age, investing in your future doesn\u2019t have to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2582,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,4],"tags":[],"class_list":{"0":"post-2581","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","6":"hentry","7":"category-blog","8":"category-financial-planning","10":"post-with-thumbnail","11":"post-with-thumbnail-large"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Power of Compound Interest - ZC PRETORIUS<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/zcp.co.za\/main\/power-compound-interest\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Power of Compound Interest - ZC PRETORIUS\" \/>\n<meta property=\"og:description\" content=\"Many South Africans are unfortunately ill-prepared for retirement, and it\u2019s an unsettling prospect that so many citizens of this developing nation may not be able to support themselves in their golden years. 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