Sunday Mirror (Northern Ireland)
It’s easy to be as smart as Einstein
Simply follow his theory of compound interest Happy birthday to my wonderful mum, who turned 80 this week.
She has helped guide me through the obstacles of life, and gave me the confidence to pursue a financial career.
Sadly, investing was never an option for her, but it is for you.
Today you can invest easily; so easily in fact that some apps, such as Chip, Plum and Cleo, will help you save and invest each time you spend money, or get paid.
As I have aged and become a parent myself, I have been blessed with the ability to reflect on my life experiences.
As a young financial planner, I would explain to clients what I had been taught – not what I had experienced. Now, after over a quarter of a century as a financial planner, when I speak to clients, I often talk from my own experience.
One message I preach is the value of compound interest, which Albert Einstein called “the eighth wonder of the world”.
He said: “He who understands it, earns it; he who doesn’t, pays for it.”
Compound interest is when the interest one earns on a sum of money is reinvested and generates additional interest. It’s like rolling a snowball down a hill – it starts off really small, then gets bigger and bigger. If you kept on rolling it, it would get really big, really fast. The growth rate isn’t the same throughout; it grows faster over time.
Imagine if my grandparents had been able to invest £10 for my mum when she was born in 1941. That investment would have averaged over 16%pa growth over 80 years, and would be worth more than £1.4million today – without adding a single penny to it.
Although my grandparents weren’t able to invest for my mother, you could perhaps invest for your own children or grandchildren.
You have the ability to change not only your own financial future, but that of your children too. But you have to take that first step.
When I advise a young couple starting out, I suggest that they try to live on one salary and save the other – if they plan a family, living on one salary may become a reality one day anyway.
If they were able to put away £1,000 per month, at 10%pa over 25 years they could have over £1.3million – which could help them to retire early.
Looking back, I know that 25 years passes in a heartbeat.
Unlike my grandparents who didn’t have the knowledge of or access to investing, you do.
You have a choice – the 25 years will pass quickly, and you will either have saved or not. Make sure you don’t have any regrets.