Starting Your Savings Plan and Investment Plan Early To Achieve Your Financial Growth

How much is saved and invested depends on the target that you seek to achieve and the time allocated to reach it. To achieving a target savings sum in the future, Putting aside a portion of your monthly income is important

The need to save is essential for individuals who aspire to achieve a financial goal in the future. Regardless of your age or income level, cultivating a good savings and investment plan will help you reach your financial goals. The wisdom of saving over an extended time horizon will become more apparent as we move on in our working lives. (Solomon quote: The proper way to live is to “let your eyes look straight ahead, fix your gaze directly before you. Make level paths for your feet and take only ways that are firm.”)

The saving rate, which is the amount saved as a percentage of personal income, depends on your specific financial needs and the target pool of savings you seek to achieve.

Whether you have recently joined the labor force or have already been a part of it for a while, you need to ask yourself “How much and how soon should I start saving to achieve my target sum?” Keeping in mind that inflation will deflate the purchasing power of money in the future, a well-planned savings scheme over an appropriate time horizon will help ensure you achieve your target sum at the end of the period. Here is the idea: money/coin/ currency are just an exchange tool easier for human being to exchange their needs/assets. So just merely keeping money as a saving is just first steps, to achieve your savings money growth you need do investments.

After deciding on the level of savings to be set aside, the money should then be strategically invested in various types of investments depending on your risk profile and objective. The effect of compounding and reinvestment in the appropriate investment vehicle can help your savings grow into a sizable amount that contributes to your total wealth.

The following scenario illustrates how an early start in implementing your savings plan can significantly reduce the monthly amount saved required to attain your target savings sum. If you objective is to accumulate the sum of RM500,000 in 40 year time and assuming a 5% compounded rate of return. You only need to put aside as little as RM326 per month to achieve the target sum as shown in Table 1 below.

If your savings period is reduced by 10 years to 30 years, you will need to save a much higher sum of RM598 a month. This is 83% more than the monthly savings of RM326 to be set aside if you had started saving 10 years earlier for the target sum. In stressing how an early start matters, starting a saving plan with only 20 years before the target date requires you to put aside an even larger monthly sum of RM1,211 to achieve a sum of RM500,000

If you shorten your savings period to 10 years before the target date, an even more significant jump in monthly savings is required. You would need to save RM3,207 each month for 10 years in order to achieve the target. That would be 883% more than the much smaller sum of RM326 put aside monthly if you had diligently started saving 30 years earlier.

In conclusion, the guiding principle is that the earlier you start to save, the less you have to put away each month due to the power of compounding and reinvestment of investment returns. This increases the chances of accumulating a higher level of savings at the end of the investment period. Thus, the prudent action to take is to priorities your savings and investments plan. For Investment Plan Ideas to achieve growth in you saving money, please email me: ngsinsiang@hotmail.com