How to Make Money Grow

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Making money grow requires saving money in a high-interest account and letting it sit for several years. Start saving money at an early age to accrue the maximum amount of interest with investing advice from a certified financial planner in this free video on personal finance.

Part of the Video Series: Investing Information
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Video Transcript

I want to tell you a little story about how one young woman was able to make her money grow by just putting a little bit away every year. The example I want to share with you is if an investor starts at age 18 and they decide they are going to put $2,000 away every year into an IRA until they are 25, that is seven years roughly. Then they stop and for some reason they decide not to invest any more until they retire. On the other hand another investor comes in and decides at age 25 that they are going to start investing and they invest $2,000 a year until they turn age 65 and then they stop. Who do you think has more money at the end? Most people think the second investor does because they have invested $2,000 a year for a larger number of years. The truth is the first investor actually ends up with a little over $300,000 at the end of the time frame while the second investor actually ends up with around $250,000. How is that you ask? Well it boils down to the miracle of compounding interest. One of the things the investor that started at age 18 has on their side is they have an additional seven years for that money that they have invested to generate interest and dividends and those are reinvested and it compounds and grows over the years. For example if you have $100 and you invest it and you get $10 in interest that year and you don't do anything with it you just let it stay in there and continue to earn interest, the following year you are going to earn that same amount of interest on $110 and if you keep doing that over and over your money grows exponentially. So how do you make your money grow? One of the easiest and simplest ways is to begin saving as soon as possible and don't touch the money and let the interest and dividends stay in the account and reinvest and buy additional shares. This is a way for you to keep investing and reinvesting in your investments at a very low cost and if you don't touch it you will be amazed at the results over time that your investments can provide for you.

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