3.1.8 A savings calculator
- 3.1.1 Reasons to save
- 3.1.2 What are you saving for?
- 3.1.3 Case study: Saving for their future
- 3.1.4 Why people don't save
- 3.1.5 Emotions, habits, behaviours and your money
- 3.1.6 How to save
- 3.1.7 Video: Why you should save and how
- 3.1.8 A savings calculator
- 3.1.9 The rules of saving
- 3.1.10 Summary of key messages
How fast can you save towards a goal? Try the Financial Goal Calculator to see how your savings will grow when you make a regular contribution to a savings plan.
Here's an example: Suppose Jennifer has $250 in her savings account on January 25, 2017. She is thinking of buying a house in the future and would like to be able to save up $10,000. She decides she can have her bank make an automatic transfer of $250 every month to her savings account. How long will it take her to reach her savings goal with an interest rate of 4%? Inputting her information into the calculator, she finds that in only 3 years she can attain her goal.
[Source: Screenshot from the Financial Goal Calculator]
The Rule of 72
If you don't have a calculator, the Rule of 72 gives you a quick way to see how your money grows with compound interest.
- Divide the rate of interest into 72 to see how many years it will take to double your money.
- At 10% interest, your money will double in 7.2 years (72 ÷ 10)
- At 4% interest, your money will double in 18 years (72 ÷ 4).
- You can reverse this: divide 72 by the number of years to see what interest rate you need to double your money.
- To double your money in 20 years, you need to earn 3.6 percent interest (72 ÷ 20).
- To double your money in five years, you need to earn 14.4 percent interest (72 ÷ 5).
The difference in the amount of interest paid may appear to be small, but over time it can amount to a lot more savings. The key is to start saving as soon as possible.
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