We've gotten quite a bit of interest on our previous post and lots of people want to hear an idea but there's always that lag time between thinking about something and actually taking action on it.

Time Value of Money

There is a concept in financial planning called the "Time Value of Money". Basically, your value of money will either decrease over time (due to inflation of prices) or increase over time (if you get returns / interest on your money).

Here's a simple illustration:

How much is a cup of Teh Ais today at your local coffee shop / kopitiam / mamak? Let's put an average figure of RM 2.30 (in KL and PJ area, do correct me if I'm wrong city folk). How much was it say in year 1999? I would say it was about RM 1.50.

That puts an "inflation of goods' price" at 2.16% (according to my time value of money calculator).

This means that the inflation rate over the past 20 years is about 2.16% (though it may not be the best indicator of inflation since other things may inflate at a much higher rate, but do hear me out...)

In other words, if you have left your money in the "safety" of your savings account at the bank at 0.3% return a year....though the amount of RM in there doesn't really change much, your VALUE of savings have effectively been reducing by 1.86% per year.

And based on the calculated inflation rate of Teh Ais, if you had RM 10,000 worth in the bank 20 years ago, and you left it in the savings account, you'd now have RM 6,461.43 actual worth. That doesn't sound good.

Now, if you had that same amount of money and it was getting you a return of 3.5% per year, you'd now have RM 19,897.89 worth of money in that account! Quite a stark difference wouldn't you say? Ironman would be proud.

What if you had that kind of return in an account that was flexible enough that you could take out that money in emergencies quickly but if you left it invested, you'd get the interest on a monthly basis?

This is just ONE of the myriad solutions we have in store for you and your loved ones. Speak to our friendly adviser(s) today to find out more and take action today!

#Investment #TimeValueofMoney #Savings #Returns #Gains #Savingsforchildren #SavingsforRetirement #Interest

Featured Posts
Recent Posts