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Developing a Savings Plan Time value of money Savings and investments are very important parts of your financial plan. How much your savings and investments earn over a period of time can be a significant factor in helping you achieve your goals. Three factors determine how much money will be available to meet your specific financial goals. These factors are time, money and rate of interest. - The more time you have to save, the more money you will have at the end of the time period.
- The more money (principal) you have to save, the more money you will have at the end of the time period.
- The higher the rate of interest you can earn, the more money you will have at the end of the time period.
The "Time value of money" table shows the dramatic results of what time value of money can mean to you. In this example, two people save $2000 annually, each earning 9% annually. You can see that the person who invested for 9 years, from the time she or he was 22-30, made a total investment of $18,000. When she or he retired at age 65, the fund totaled $579,471. The other person who chose to wait until she or he was 31 continued making investments until retirement at age 65 but retired with $470,249, $109,222 less than the person who began investing earlier in life. [ Next ] Pay Yourself First
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