Saving For a House or Holiday? Here’s How Some Simple Maths Can Work for You

"I see my role if needed as a financial mentor but one who can show warmth, practicality and empathy."
-Katherine Hann
May 30, 2017

Saving For a House or Holiday? Here’s How Some Simple Maths Can Work for You

By Katherine Hann

Saving For a House or Holiday? Here’s How Some Simple Maths Can Work for You

Today, I’m going to let you know how maths can be both fun and useful.

Most of us have a savings goal of some kind – whether that’s a big holiday getaway or a dream home. The problem we face is “how do we get there”?

Well it goes without saying that you need the capacity to save something from your income, but did you know you can also use a little gem
called compounding interest?

Compounding interest is basically interest on-top-of interest; there’s a formula for it but it does tend to scare some people away.

Instead, let’s look here at a handy interest calculator on ASIC’s money smart website to show the effect.

Did you know that if you put aside $1,000 over a period of 5 years at 10% annual interest rate, you will
end up with $1,600, and after 7 years you will have $1,949?
If we compare that to a 2% interest rate (like one you might get in a savings account) over that period, you’re looking at $1,149 after 7 years- not
as impressive.

Here’s the real kicker, if you want to compare this to superannuation, why don’t you try adjusting your figures between 5%-10% over a period of 30 or even
40 years! Your $1,000 at 10% pa over 40 years becomes $45,259.

This is not magic, it’s just simple maths – the compounding effect. You don’t even have to add more money to it, but imagine if you did!

What you need is the best interest rate you can get for the risk you are taking. You need to leave the money there,
and it needs time  to grow.

If you’d like to know how to get help with this, financial advice could get you there with a lot less savings than you think. Call Katherine Hann today on 8299 9927, or email katherinehann@internode.on.net for a no-obligation first appointment.