There are options for your savings which depend on factors such as your risk tolerance, the time frame in which you desire to attain your goals and your overall financial health. Compound interest can change the way your money works for you in your savings plan. Compound interest can be defined as interest calculated on the initial principal and on the accumulated interest of previous savings. Think of it as the cycle of earning “interest on interest” which can cause wealth to rapidly snowball.
Compound Interest will make a deposit grow at a faster rate than simple interest, which is interest calculated only on the principal amount. Time is your best friend and is the one thing that makes compound interest so effective. So, saving now and starting early will pay dividends in your future and help you accumulate extra money. To quote Warren Buffet “My wealth has come from a combination of living in America, some lucky genes, and compound interest,” While saying that savings is important to start as soon as possible it is never too late to start.
There are options for your savings which depend on factors such as your risk tolerance, the time frame in which you desire to attain your goals and your overall financial health will determine your investment. You can invest in a savings account, money market account, CDs or outside a bank you can look into Mutual Funds and other investments. One important consideration is if your employer offers a 401k program and if they match your contributions, try to maximize on this opportunity. It is pretax dollars and your employer will give additional monies. If this is not available you can look into a regular IRA or Roth IRAs. If you have a small business, there are other options that we can talk about.
Another option to consider is annuities. While all these instruments are important and can be fruitful, they can also be confusing. Do you know where to invest your money? Should you diversify your accounts? What are the tax implications of these investments? These are some of the many questions you may have to think about. As a trained and experienced person this is where we can come in to help you with your decisions. Here at BEW Financial Solutions we are constantly learning as new things and rules change. We also partner with accountants and lawyers to work together to get the best results.