This article is for the people that want to learn how to save money and still have time to do what they want to do. The key is by using the concept of compound interest.
A savings account earns interest. The balance in the savings account is the initial deposit plus the interest. As this balance grows over time, the interest also grows. This is the accumulated interest on top of the initial deposit. That total interest grows and because it grows exponentially, the savings account balance compounds annually, and then insured as interest grows.
Now, some people have savings accounts that they do not operate daily, but when they do it is usually a certain fixed interval of time between deposits. So for those that have all their eggs in one basket, this type of savings accounts would not be ideal. What if you didn’t really want or need the savings account? Imagine if you had money set aside in another account that you knew was growing and growing, but you needed to access it when you wanted or needed it?
The solution is to use an investment account offered by many financial institutions. A properly set up CD can assure future financial success, as long as the deposit is not made too soon. But this type of investment account can also be beneficial to the saver who puts money in over time.
If like many people, you do not have a regular savings account, you may be at a disadvantage. Over time, interest compounds, and the interest grows exponentially, as well. A CD of one year or two will yield much more than one that is set up for one month. The longer the term of the CD, the larger the compound growth and rate of return. However, a CD cannot be re-funded, so it is not re-funded any time soon. Many people use CD’s to finance their retirement and their children’s education.
A CD allows you to put aside money each month without having to worry about it being lost or needing to be invested. Saving is a difficult and emotional concept for a beginning saver. A CD can do this for you and put money away each month without having to worry about how to raise cash. You have the freedom additionally to invest the money you save. You can put the CD away and not worry about it any longer. You have slow and steady compound interest working for you and not against you.
Let’s say you needed $100,000 for a pressing or important another important project for the company. With a CD the deposit can be protected and yield such a huge return without having to worry about short term need. Also, once the CD has mature, the interest will be taken out along with the payments and put towards a future project. You don’t have to worry about the money and it does not have to be in the bank. This is the power of an investment account and the ultimate money saving and money generating tools as well.
However, be sure to calculate the balance at the end of each term and make sure it is larger than the balance the year before. If it is not, then you need more money than you thought. You need to re-budget or cut back on something else. This money, again, can be re-invest in the same type of investment account so that it is growing and compound interest is also steadily working against you.