People claim that
making money is really difficult and they go after it like a donkey chasing
carrot.
" The rich don't
work for money, they make the money work for them"
I'll now demonstrate
how young people can become wealthy and thus enable you to appreciate the
beauty of finance. I'm going to go over some ideas to make you understand the
concept which I indent to disclose.
Compounding simply
refers to the increasing value of an asset due to the interest earned on both a
principal and accumulated interest.
Annuity is a series
of payments made at regular intervals. Future value of annuity is among the
best financial loopholes . How future value of annuity can be calculated is
demonstrated in the illustration inserted.
Below is an example
that explains how future value of an annuity works in real life:-
Just imagine that on your birthday, your family buys you a cake and other gifts, and you happily enjoy them. However, if you set aside ₹ 2000 from your birthday celebration each year to invest, the following amounts can be obtained by investing at various ages by the time you reach retirement.The illustration will help you to understand the magical effect of compounding.
To clarify the
previously mentioned numbers. An amount of ₹ 1,46,87,715 can
be secured if a person invests ₹ 2,000 per year on their
birthday starting at the age of 20 and with a total investment of ₹ 80,000 ( 2,000 per
year for 40 years).
The amount ₹1,46,87,715 comprises
of the capital amount ₹ 80,000 and interest amount
₹ 1,46,07,715.
Therefore, simply by
analysing the numbers, you would realise that by the time you reach retirement
age, you will be a crorepati.
Thankyou.
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