Power of Compounding: Money doesn’t come easy as earning it is a difficult task. Many people earn money all their life, but at the end, they have little or negligible left in their hands. If you also feel that you also fall in the category of such people, you should know the power of compounding. Using it to the right effect, if you invest a little bit every day, you can easily accumulate more than Rs 1 crore in the long run. It may sound impossible, but it is possible with the help of the power of compounding. Let us know the formula to become rich.
Save only Rs 100 daily
Most of the middle class working people waste around Rs 100 every day in drinking tea, coffee or smoking cigarettes.
If you save these Rs 100 daily and start investing it, you can accumulate a corpus of more than Rs 1 crore in the long run.
How to make Rs 1 crore from Rs 100?
Suppose you save Rs 100 daily. In this way, you will save around Rs 3000 in a month.
If you keep investing this money every month in plans like NPS and mutual funds, then your money can become more than Rs 1 crore after some years.
However, here, your age and investment period matter a lot.
Let us assume that by the age of 25, you get a job and start this investment. In this way, you will invest till you retire i.e. till the age of 60 years.
Your investment of Rs 100 daily for 35 years will become Rs 1.15 crore.
Investing Rs 3,000 every month means that you will deposit around Rs 12.60 lakh in 35 years.
During this period, you will get only interest of Rs 1.02 crore at the rate of 10 per cent.
After 35 years, your total amount will be around Rs 1.15 crore.
This will be possible with the power of compounding
Under compounding interest, you also get interest on interest. Suppose you got 10 per cent interest i.e. Rs 300, on Rs 3000 in the first month.
Next month, you will get interest on Rs 3000+3000+300 i.e. total Rs 6,300.
In this way, by earning interest on interest, you will earn more than Rs 1 crore in 35 years from interest alone.
(Disclaimer: Investments are subject to market risks. Do your own research or consult your advisor before investing.)