We’ve started 2023 in a stronger market than anticipated, however there could be another drop to come. With a potential recession looming it could be a tough year. Despite the increased cost of living, putting something away, even if it’s a small amount, will benefit you in the long-term. It's a good idea to remain disciplined in regular saving, as the power of compounding interest is something worth taking advantage of.    

The Benefits of Regular Saving

By regularly saving, you will have a constant amount of money going into your investment, which will then have the opportunity to grow over time. The power of compounding interest will work in your favour as your savings will earn interest on both the principal amount and any previous interest earned. It “compounds” because the gains in any one year can add to those in previous years which accelerates the growth of your capital. This means that the longer you save, the more your savings will grow and you will end up with a larger sum of money in the future.

For example, if you save $100 a month for 10 years and earn an average interest rate of 5 per cent, you will have saved $12,000 and earned an additional $3,103 in interest. That’s an increase of over 25 per cent on the original amount saved! If you were to continue saving the same amount each month for another 10 years, you would earn an additional $6,506 in interest, bringing the total to $21,609.

Start Early

Starting to save early is key to reaping the benefits of compounding interest. The longer your savings are invested, the more time they have to grow. This is why it’s never too early to start saving, even if it’s only a small amount each month. The earlier you start, the more time your savings have to grow, and the more you will end up with in the future.

Set a Goal

Setting a savings goal can help keep you motivated and on track. Whether it’s a short-term goal like a holiday or a long-term goal like retirement, having a clear target can help you stay focused and disciplined in your savings. It’s important to regularly review your goals and make adjustments if needed to ensure that you are on track to achieving them.

The discipline of regular saving, combined with the power of compounding interest, can help you reach your financial goals and secure your financial future. The earlier you start saving, the more time your savings have to grow and the more you will end up with in the future. So, it’s never too early to start saving, even if it’s only a small amount each month. By setting a savings goal and remaining disciplined in your saving habits, you will be well on your way to financial stability and independence.

Think about your goals and if you aren’t sure, speak to one of our financial advisers. Our team at Trustees Executors can help you establish an investment plan that is specific to your financial goals.

Call 0800 878 783
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www.trustees.co.nz