For your info...
- Do you know, that money if left untouched in CPF for about 30 years, it will double itself? If you have $100,000 in your CPF OA in 2015, it will have at least $200,000 by 2045 without any additional contribution at all (assuming current interest rates of 2.5%). You do not need to do anything!!!
- Do you know, that money in CPF SA, doubles itself in less than 20 years?That's why its called special account!
This is not some magic advertisement or false claims by CPF. This is just the work of the little devil that we all know as compound interest.
This amazing little devil has build wealth for many rich people who understand it. It is by no means a magic bullet for us to riches, it is just a mathematical formula.
Simple interest is like this: when you have $100, every year, you get the interest rate based on the same $100.
Compound interest is more complicated, but essentially, every time you get a interest payout, that extra payout adds to your sum and you get exponentially more each payout. There is interest on the interest previously earned.
Einstein (who is a physicist) allegedly said that compound interest is the eighth wonder of the world.
The maths is very simple. There is a way it will work in reverse to find out how many years it will take for your money to double. Just take 72 divide by the interest rate. At 2% interest annually, it will take about 36 years to double the money you started out with.
At an annual interest rate of 24%, it will take a mere 3 years to double the money.
As always, I urge everyone to read up and research beyond the CPF web to gain more knowledge about how certain maths work.
No comments:
Post a Comment