Imagine if you had saved enough money to allow them to pay cash for a car or to put a deposit down on their own home? The following examples show the power of regular saving over a period of 21 years. The results are very impressive!
$25 A Month
Starting from a current savings balance of $0, if you save $25 per month for 21 years you will save a total of $11,108.54.
During this period you will:
1. Have contributed $6,300 in monthly payments
2. Earned a total of $4,808.54 in interest based upon a 5 % return
$25.00 PER MONTH IS ROUGHLY $5.75 A WEEK!
$50 A Month
Starting from a current savings balance of $0, if you save $50 per month for 21 years you will save a total of $22,217.09.
During this period you will:
1. Contribute $12,600 in monthly payments
2. Earn a total of $9,617.09 in interest based upon a 5 % return
$50.00 PER MONTH IS ROUGHLY $11.50 A WEEK!
$75 A Month
Starting from a current savings balance of $0, if you save $75 per month for 21 years you will save a total of $33,325.63.
During this period you will:
1. Contribute $18,900 in monthly payments
2. Earn a total of $14,425.63 in interest based upon a 5 % return
$75.00 PER MONTH IS ROUGHLY $17.25 A WEEK!
$100 A Month
Starting from a current savings balance of $0, if you save $100.00 per month for 21 years you will save a total of $44,434.18.
During this period you will:
1. Contribute $25,200 in monthly payments
2. Earn a total of $19,234.18 in interest based upon a 5 % return
$100.00 PER MONTH IS ROUGHLY $23 A WEEK!
As the above examples show, earning interest on your child's savings is a great way to add extra money to what you contribute, so you can build a greater nest egg for your child. In all cases shown above, you will have personally saved 57% of what you have accumulated over the 21 years. The remaining 43% is what you earned from interest paid on the money you had saved.
In the above examples an interest rate of 5% has been applied. To help your child's savings grow at a faster rate, if you can invest the money at a higher interest rate, then your overall return over the long term will be much higher.
With any investing though, you don't necessarily want to concentrate on only earning the highest interest rate. You need to also ensure your money is protected and that you aren't going to lose the money you have so diligently saved for your child. Often higher interest rates are paid because there is a higher risk. You need to carefully balance the risk of where you invest your child's money and the overall return.
This article is designed for example purposes only to give you a rough indication of the likely results from the power of saving a regular amount of money for your child over a period of time. There are many factors that will influence your individual long term savings results such as the interest rate paid on your savings, any account keeping fees and your individual taxation position. These examples are of a general nature only and do not take into consideration your own personal situation or circumstances. You should always obtain independent advice specifically tailored for you.
Hello, this is Detective Heather here from Money Detective Pty Ltd. I help people overcome all sorts of money troubles so that they can reduce their stress. Whether you can't afford your bills, can't save, find your credit card out of control or if you worry about your future, I am here. I am very passionate about money and helping people so I am here for you.
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Detective Heather Wood is Managing Director and writer for Money Detective Pty Ltd. http://www.moneydetective.com.au
© Money Detective Pty Ltd 2009
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