We have often heard the saying “Time is money.” But have you ever really stopped to think about it? I have. And when I did, I came to this somewhat corny conclusion; it is no coincidence that the head of most wristwatches looks like a coin. Time and money definitely have a lot in common.
Many of us have often analyzed this statement partially from the angle of more working hours equal more money. However, there is way too much relevant detail we ignore when we stop at that point and I would like to share a few investment facts linking time and money with you today.
Time yields Compound interest
Compound interest is simply the interest earned on interest. Sounds pretty simple but over time, compound interest makes all the difference you can possibly think of. For example, Adwoa is 25 and she invests GHS100 every month, by the time she is 35, she gets about GHS31, 515. Assuming she earns an interest of 5% every year. By the time Adwoa is 45 however, she would have GHS83, 091 as the value of her investment. Note that the only factor that has changed is time. Though 10 is half of 20 years, the amount she accumulates at the end of 10 years (GHS31, 515) is not half of the amount she accumulates at the end of 20 years, which is GHS83, 091. Savvy investors understand the benefits of investing early and take advantage of the potential gains from compound interest. To help you better understand how time and compound interest are related, here’s another example in this video. Click to watch
Time yields better savings habit
Investing early allows you to cultivate a savings culture by focusing on your budget and cutting down on expenses when needed. The goal here is to earn money by saving money, which is impossible with poor spending habits and a life full of impulse buying. Through early investment, the lessons learned will pay off in the long run, especially, when you have even more capital to rake in more returns.
Over time, you will comfortably be a step ahead
This point relies on the principle of “The early bird gets the worm.” The earlier you begin investing, the better your personal financial situation will be, a few years down the line. Over time, you realize that compared to your colleagues, who may have chosen to invest later in life, you will be able to comfortably afford certain things, and others may not. Early investing also prepares you for when times get tough in the future.
To wrap it all up, I would say that time is a great asset when it comes to wealth accumulation. At the end of the day, the defining differences we see are the results of the choices we make earlier on in life. It is never too late to turn your fortunes around. But the earlier u start, the better.