It’s easy to get pulled in by the get-rich-quick promise. Who wouldn’t want to get rich quickly? But as investment mogul Warren Buffet points out, “When promised quick profits, respond with a quick ‘no.'” And he would know! In fact, most people who successfully build wealth do so over time and with a lot of patience. Buffet himself accumulated $70 billion (he has a current net worth of $90 billion) only in his mid-60s!
The saying “good things come to those who wait” may sound hackneyed, but there’s truth in the cliché. Time is needed to accumulate savings and reap rewards through various money management strategies.
Here’s why time is so important.
Your money grows with time
Whether you’re earning returns on investments or interest on savings accounts, it can take time to see the rewards of these strategies. Just like a seedling, money needs time to grow.
While there are stories of your friend’s cousin’s roommate earning big on the newest and hottest stock, most of the time it takes months or years to see big growth in your wealth.
So rest assured if you’re seeing small increments and sometimes dips. It’s completely normal and even expected.
Time is especially important when it comes to compounding interest.
What is compound interest?
Compound interest is simply the interest you earn on interest. This happens when the amount you invested, together with the interest it earns, is reinvested over and over again. An example of compound interest: Initial principal amount: $1000 Interest rate per year : 3%| Year | Invested amount (A) | Interest earned (B) | New principal amount for the next year (A + B) |
|---|---|---|---|
| 0 | $1000 | 3% x $1000 = $30 | $1030 |
| 1 | $1030 | 3% x $1030 = $30.90 | $1060.90 |
| 2 | $1060.90 | 3% x $1060.90 = $31.83 | $1092.73 |
| ... | ... | ... | ... |
| 10 | $1304.77 | 3% x $1304.77 = $39.15 | $1343.92 |
| ... | ... | ... | ... |
| 20 | $1753.51 | 3% x $1753.51 = $52.60 | $1806.11 |
This illustrates the power of rolling interest. If additional amounts of money were added as the interest rolls, the amount earned would be even greater!
Look at what compound interests can do to your money over 20 years- by earning 3% p.a., your investment grows by more than 80%. With a 4% interest p.a, your capital will more than double!
Of course, in reality, the investment journey is never that smooth and you may experience short-term losses before achieving the desired annual return on your investment. But if you stay invested long enough, you have a high chance of achieving the desired rate of return.
The money that grows over time gives your future self more options in daily life
You know what they say, money can’t buy you happiness. We reckon that’s only half true!
Money does open up doors of possibilities that can improve your standard of living.
Give your future self a leg up by building wealth early!
With more savings accumulated at an earlier stage, you can enjoy more options when it comes to making daily decisions.
For example, being able to afford a slightly more expensive gift for loved ones during their birthdays, opting for a more luxurious staycation locale, or paying for a more premium insurance plan with better coverage.
The wealth accumulated with time also makes managing future finances less scary
The big milestones in life can be expensive – getting married, buying a home or car, and welcoming a child to the family, amongst others.
Don’t let the hefty price tags of these happy occasions dampen the joy.
By giving yourself time to grow your money, you’ll be well prepared and confident to make payments when the time comes.
Lastly, time allows low-risk investments in your portfolio to generate returns
According to the concept of risk-reward, investors who take higher risks are usually compensated with greater potential return. Likewise, the lower the risk, the lower the potential return.
As compared to higher-risk investments that may be subjected to greater fluctuation, Earn+ provides relatively more stability in your portfolio as your funds are invested in low-risk investments, managed by our asset management partners – Fullerton Fund Management and UOB Asset Management Ltd – with track records showing consistent performance.
You might not be super excited about how lower-risk options are tied to smaller rewards.
We totally get it. But while the idea of earning more quickly is attractive, it’s important to note that more stable and conservative investments are an essential portion of your portfolio to achieve your short and medium-term financial goals. With time, these modest returns do add up!
Saving up for a big purchase or renovation works for your home in the near future, say 12 to 18 months? Earn+ can help by getting you modest returns with a reduced risk of plans going awry. This is as compared to investing in riskier asset classes, such as stocks, where the potential losses are greater, and may take a longer time to recover.
Plus, it can earn you 2 to 2.5% interest p.a*! Imagine this – $3,000 placed in your Earn+ account today could potentially earn you up to $60 in 1 year, $180 in 3 years, and $300 in 5. It’s all about waiting it out. Get ready to welcome money that rolls in even when you don’t think about it.
Earn+ is big on flexibility too as you call the shots on how often and how much to put into your Earn+ account. Withdrawals anytime are penalty-free as well!
Time and money go hand in hand
Instead of viewing time as a period spent simply waiting, try to look at it from another perspective.
Time is an asset, the necessary element you need when you grow your money through saving and investing. Time also gives your future self a better quality of life, and the ability to be ever-prepared in the face of life’s challenges.
Growing your wealth takes time, so there’s no better time than now!
Top up your Earn+ account to grow your savings, and set up recurring transfers to minimise the hassle.
*Projected yield and returns are not guaranteed or protected
