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Your bank wants you to make this mistake!

by , 14 April 2014
Your bank wants you to make this mistake!
“Francois, I have R20,000 that's been lying in a savings account for 20 years now - I've finally decided I want to invest the money and make a return to supplement my retirement…” - M

So M wants to invest her money after years of keeping it in a savings account. Turns out she received R15,000 cash 20 years ago as part of her inheritance.

But then she made the biggest mistake she possibly could have…

She just let this money languish in a savings account at the bank.


Why the banks HOPE you make this mistake


Look, it’s great if you save money.

But if there’s one mortal mistake you can make with your savings; it’s putting this money in a savings account at the bank.

You see, these accounts typically have very low interest rates

The banks like it that way – they get to use your savings without paying you big interest payments.

In M’s case she put R15,000 into her savings account twenty years ago and today it’s worth R20,000. She did get interest, but ended up paying some banking fees on the account as well. In total this brings her to an annual return of 1.5% on her money.

One small change could make you hundreds of thousands of rands richer!


Now you might think – R20,000, it’s a lot of money but it won’t change my life.

And you might be right there.

But if M made one small change to how she handled that money 20 years ago it would have.

You see, if she’d only put that money into a fixed deposit account yielding 9.5% (and you can get this interest rate today at some banks even with interest rates at all-time lows) she could have made a lot of money…

In fact it could have been R92,124 today if she’d gone for this higher interest option.
And – if she’d invested this money in an interest paying account like this when she was 19 it would give her R1,067,960 by the day she retires at 65.

Now that sounds a lot better than still sitting on nearly the same amount she put in to start out with…

But putting her money in a low interest savings account is only one part of the mistake M made…
The other part was to wait 20 years before deciding to invest this money.

Why NOW is always the best time to start investing


Albert Einstein said - “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

And that’s exactly what I’m getting at – The SOONER you start making money on your money the bigger the growth effect becomes.

Yes, it’s easy to say “I’m busy. I don’t have time for these things right now” or “I’m young. Investing is for old people”.

But the fact is – Every day you wait you are paying for someone else’s retirement instead of yours.

For instance, if M invested her R15,000 into the JSE at age 19 and it returned 13.5% a year (which is roughly what the JSE has returned historically), her money would be worth R5,766,294 when she reaches 65.

That’s without putting another cent of her own money into it…

Just check this table below and you’ll see the value of investing early.

The Value of Investing Young

 
So, as you can see, someone that started investing R8,262 per year from 19 years old till they were 26 getting 9.5% growth on their money per year will have R3.5 million when they are 65.

But someone who only starts at 27 will need to invest more money and they’ll have to keep on investing EVERY year until they retire to get to the same amount of money.

Now you might not be 19 years old today, nor 27 and you could be older than 35. But the same principle counts. Every day you wait means you will need to invest more for longer to make the same money.

So the best day to start investing is TODAY!

If the 9.5% returns from a fixed deposit doesn’t get your attention but you’d still like to start investing I suggest you take a look at my free beginners investing course. I will teach you how to research the best small shares on the JSE to find you the shares that return as much as 200%, just  like Poynting and Adapt IT did for my readers in the past year.

Don’t worry if you know nothing about investing. I break everything down for you, from how to set up your first share investing account to explaining the ins and outs of the JSE and how to invest in WINNING stocks in clear and easy English.

See you there!

Here’s to unleashing real value,

Francois Joubert

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Your bank wants you to make this mistake!
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