In this day and age, it is very important for everyone to start taking charge of their finances and start planning for their future and the future of their children.
No longer can we count on the government to give us a pension when we get old. We can't just assume that we'll be taken care of financially when we stop working.
Due to the baby boomer generation, the world's population is getting older. Within 30 years, there will be so many retired people compared to the number of people who are working age that the government won't be able to afford to help the elderly in any reasonable way.
The government knows this, which is why they made it mandatory for employers to pay into a superannuation plan and are just now starting to offer financial incentives to people who have saved their own money for retirement.
Most of us have never even sat down and thought about why mandatory super was put in place, and for many of us, it's too little, too late. Even though young women in our society have many years of work ahead of them, they can't be sure that they'll have a comfortable retirement.
What gives? Even with contributions at the current level of less than 10%, a person with an average wage who works full-time for 30 years will still have to try to live on less than $20,000 per year in today's dollars.
You'll notice that I said I worked for 30 years straight. This is another way in which women are in a worse position than men. First, they often have to take up to ten years off from work to raise children. Second, women in general earn less than men. Third, a huge number of women in Australia, for example, will never have received any superannuation contributions before compulsory superannuation was made a law. This means that they haven't had any contributions made during their entire working life so far, giving them less money when they retire.
Many women may not have thought about their lack of super contributions as a problem in the past because their husbands may have been putting money into super since they started working. Due to the high number of divorces in this country, it is not a good idea to count on your partner's superannuation being there for you when you retire, even if a large portion of it is given to you in a settlement. This is because it may not be enough to keep you comfortable for a long time.
All of these things make it more important than ever for women to start building a steady source of income that will grow to the point where they can give themselves and their children a safe and happy future.
It has to be a way to make money that doesn't involve physical labour. This means that the money has to come from something other than our own efforts.
One of the best ways to get this kind of steady income is to start building a portfolio of investment properties, also called "bricks and mortar."
We need to start investing in things that will bring in money right away so that they have time to grow and develop and make us financially independent when we retire.
Compound interest is the most important idea to understand if you want to save money for retirement, help charities, or help your family.
In math, 72 divided by the compound interest rate of return equals the number of years it will take for the money to double in value.
So, if you put $1,000 into an account that earns 10% interest, it will take 7.2 years for your money to grow to $2,000, or double in value. In 14.4 years, it will be worth four times as much. In just over 21 years, it will be worth eight times as much.
If you invest your money at a rate of return of 7%, it will take about ten years to double in value. It will double in just over fourteen years if it is invested at 5%.
Rate and time are the two most important things about compounding. The end result will be bigger if the rate is higher and it is left to build up for a longer time. This is why we should start investing as soon as possible.
