Understand compound interest, how money grows over time. Learn to maximise your interest rate on savings and minimise interest rate on debts. If you have enough savings for an emergency fund, start investing excess savings into investment options that meet your personal risk threshold. Low risk options exist with high average yields (about 8%) like low fee ETFs tracking S&P 500 or other market indexes. My superannuation fund (retirement fund) has an average annual return of 12% for the past ten years, yields higher than this could impart higher than average risk of negative returns. Starting as early as you can lets you reap the benefits of compounding interest, snowballing income. Note that as interest rates go up, stock market returns usually decrease. If buying US stocks, make sure you DRS them otherwise you don’t own them. I’m not a financial adviser, I’m just savvy with retail investing
This flow chart is Australian but should loosely apply elsewhere too
When you get regular interest payments, that interest adds to the amount in the account so every interest payment your total interest paid increases. You can snowball this into a sizable figure with time, it pays more per year the longer you do it due to the snowballing. Especially if you find good interest rates and regularly review them
Essentially any account/financial product that pays interest into the account is compounding. Good interest rate accounts will vary on your country/area. Start by comparing savings account interest rates between your local banks and seeing if there are any special things you have to do to get the best rate. For example here with some banks they will pay an extra few % if you don’t lower your savings account balance that month
Can you give us a rundown on what you think is a good plan?
If we need to learn about compound interest. This is a good time to teach us.
Understand compound interest, how money grows over time. Learn to maximise your interest rate on savings and minimise interest rate on debts. If you have enough savings for an emergency fund, start investing excess savings into investment options that meet your personal risk threshold. Low risk options exist with high average yields (about 8%) like low fee ETFs tracking S&P 500 or other market indexes. My superannuation fund (retirement fund) has an average annual return of 12% for the past ten years, yields higher than this could impart higher than average risk of negative returns. Starting as early as you can lets you reap the benefits of compounding interest, snowballing income. Note that as interest rates go up, stock market returns usually decrease. If buying US stocks, make sure you DRS them otherwise you don’t own them. I’m not a financial adviser, I’m just savvy with retail investing
This flow chart is Australian but should loosely apply elsewhere too
Thats some nice info, but it doesn’t explain what compound interest is.
When you get regular interest payments, that interest adds to the amount in the account so every interest payment your total interest paid increases. You can snowball this into a sizable figure with time, it pays more per year the longer you do it due to the snowballing. Especially if you find good interest rates and regularly review them
And where are these good interest rates and compounding services?
Essentially any account/financial product that pays interest into the account is compounding. Good interest rate accounts will vary on your country/area. Start by comparing savings account interest rates between your local banks and seeing if there are any special things you have to do to get the best rate. For example here with some banks they will pay an extra few % if you don’t lower your savings account balance that month