A popular financial term that is often used in everyday conversation, but can be difficult to understand for those who have never been introduced to the subject, is the idea of investing and saving money.
Some people will invest their money in a variety of approaches, while others choose to save their money.
It is worth mentioning that investment returns are not guaranteed. If you want to know the exact rate of return, then it is best that you speak with your financial advisor before making any investments. It is easy to get lost in all the different investment types and wonder what the best option is. There are many things to take into consideration like risk tolerance, timeframe, and liquidity concerns.
An important point to remember is that it is never too early to think of investing and saving for your future. A study by Merrill Lynch and Age Wave found that 43% of Baby Boomers (those born between 1946 and 1964) and 29% of Generation Xers (those born between 1965 and 1980) believe they will need outside financial help in retirement.
It is worth noting the powerful effect of compound interest in your investments and savings. Compound interest is the increase in the principal sum due to having earned interest on previously earned interest, which can work in your favor if you are saving for something in the future. For example, if you invest $10,000 today with an interest rate of 5% that compounds annually, after 10 years you will have accrued over $16,470 in interest earnings.