 |
How Savings Grow
Individuals who start saving earlier in life have an advantage over those who start later. That's because when you put away even small amounts early, a very important financial concept is working for you: the time value of money .
When you put money away in savings or investments, the amount you save or invest is the principal. The principal earns interest, which then is added to the original principal. This amount (principal + interest) again earns interest, and so on. This process is called "compounding," and its effect is like magic when you let it work for you over time.
Why Should I Save Money?
One of the quickest ways to reach your goals is to develop a savings habit. By saving money, you're telling yourself, "I believe in my future, and I'm willing to take charge of it."
There are many reasons to save money. Here are just a few. Do some of the following apply to you?
- to cover emergencies without taking out an expensive loan
- to buy larger items, such as furniture, so you won't have to use a credit card or rent-to-own store
- to provide peace of mind so you don't have to worry about paying off a loan
- to reach the goals you have set for yourself
Your goals may include buying a house, going to college—or sending your children to college—or starting your own business. A spending plan can help you reach these goals.
Even if you haven't been successful at putting aside money in the past, that's OK. It's never too late to start—and the sooner you begin, the more time your money will have to grow.
The charts below show how your money could grow at different rates of interest if you were able to save from £25 to £200 per month.
| How Savings Grow Over 5 Years |
| Monthly Amount of Savings |
Interest Rate |
| |
2% |
4% |
6% |
8% |
10% |
| £25 |
£1,576 |
£1,657 |
£1,744 |
£1,837 |
£1,936 |
| £50 |
£3,152 |
£3,315 |
£3,489 |
£3,674 |
£3,872 |
| £75 |
£4,729 |
£4,972 |
£5,233 |
£5,511 |
£5,808 |
| £100 |
£6,304 |
£6,630 |
£6,977 |
£7,348 |
£7,744 |
| £200 |
£12,609 |
£13,260 |
£13,954 |
£14,695 |
£15,487 |
| |
|
|
|
|
|
| How Savings Grow Over 10 Years |
| Monthly Amount of Savings |
Interest Rate |
| |
2% |
4% |
6% |
8% |
10% |
| £25 |
£3,318 |
£3,681 |
£4,097 |
£4,574 |
£5,121 |
| £50 |
£6,636 |
£7,362 |
£8,194 |
£9,147 |
£10,242 |
| £75 |
£9,954 |
£11,044 |
£12,291 |
£13,721 |
£15,363 |
| £100 |
£13,272 |
£14,725 |
£16,388 |
£18,295 |
£20,485 |
| £200 |
£26,544 |
£29,450 |
£32,776 |
£36,589 |
£40,969 |
|
|
|
|