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Monday, 8 April 2013

A small tip to get you saving for Retirement

Money is like a seed. You plant it, protect it, and nurture it. Over time, it suddenly gets bigger and generates more seeds (more money) for you to plant. Just like it may take 20 years for you to end up with an orchard, it takes time to become wealthy. But if you are going to get older anyway, why not plant the seeds now so you can have that future?

We all want more money in the bank to keep up with the ever-changing demands of our lifestyles. But with the local economy currently in recession, many people are finding it hard to end the month in the black.

We invest so much time and energy into making money yet somehow fail when it comes to managing it. To gain optimal financial quality of life, we need to be able to manage our money in such a way that it does exactly what we want it to, ensuring that it is meaningful for us.
Saving is easy enough and is all a matter of putting aside a certain amount each month. Investments on the other hand are another thing altogether and the variety of options available can seem rather intimidating.

Imagine going through life planting financial seeds explained in the  example posted below every year, through crashes and bubbles.  You would reach the end of your retirement with an overflow of riches, with assets generating plenty of dividends, interest, and ‘rents’ into your bank accounts to spend, save, give to charity, or fund new investments.

A 25 year old who has a tiny sum of R300 to save every month for retirement can start to attain financial freedom by the time he is 65 years old. Starting young is the perfect time to begin putting small sums of money away for their retirement years. You decide to put your money into an ETF (Exchange Traded Fund) like Satrix (www.satrix.co.za) that offers a realistic minimum average growth of 15% per annum over its lifetime. There’s a range of ETFs available to you,  you can find out more at www.etfsa.co.za. The minimum investment amount for Satrix is R300 per month. I live on the principal that it’s VERY important that when you get paid your salary that you pay yourself first! You can do so by having the investment in Satrix automatically debited from your account.
For the next 50 years the investment in the ETF(Satrix) is ignored and the cash dividends pile up and is reinvested, generating further income. You never make a withdrawal from the fund.  Like a seed planted in the forest and left to nature, you walk away and forget about it.

What happened over that half century?  How much money would be in the account as a result of your investment in that ETF account?
Well, did you know that…If today you were to invest just R300 per month (R3600 per annum) at a rate of 15%, your investment at the end of 50 years would be worth a staggering sum of R3,901,166 !

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