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They say time is money but when it comes to investing, time is actually wealth. In Singapore’s fast-paced economy, understanding the magic of compound interest can be the key to financial freedom. So, how does it work?
POWER OF COMPOUNDING
Think of compound interest as a snowball rolling down Bukit Timah Hill small at first, but growing bigger as it gains momentum. In finance, this means your initial investment earns interest, and that interest starts earning more interest over time. The longer you leave your money to grow, the bigger the effect.
Let’s say you invest S$10,000 at an annual return of 5%. In a year, you’ll have S$10,500. But in the second year, you’re earning interest not just on your original S$10,000, but also on the extra S$500, bringing your total to S$11,025. Fast forward 20 years, and your initial sum has nearly doubled without you lifting a finger!
WHY START NOW?
Singapore’s CPF system already takes advantage of compounding, but you can supercharge your wealth with investments in ETFs, stocks, or savings plans. The trick? Start early and stay consistent. The longer you let your money grow, the more time does the heavy lifting for you.
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So, whether you’re saving for your first BTO or early retirement, remember: wealth isn’t just about how much you earn it’s about how wisely you let time work for you.
