Interest rates are one of life's little things that matter. SGD1,000 grows to SGD1,188 in just five years at an interest rate of 3.5%. And the same amount grows to SGD1,411 in 10 years – all without you having to lift a finger. This is what the finance industry calls "compounding": making your savings work harder for you. In a way, you are making your retirement plan more achievable.
And it becomes more powerful when given more savings to work with. Someone who puts aside SGD1,000 each month from the age of 35 can end up with nearly half a million by the time 60 rolls around. But someone who starts saving even earlier, at the age of 25, has the benefit of time to more-than-double the nest egg to SGD682,387. Not shabby at all!
Return = 6% p.a. (based on the Balanced profile from the DBS Strategic Model Portfolios)
Inflation = 2.5% (consumer inflation for all items at April 2014)
And we can certainly use any help from the little things to counter inflation – another "little thing" that can erode the amount of money there is to retire with.
See how compounding can help your savings to grow: Savings Calculator