Money making money even while one is asleep
Yes, in a way, he is right, you can't just pluck money off a tree. But even a small penny is like a seemingly small seed, which when nurtured and nourished carefully, can be the beginning of a forest.
Power of compounding
In the world of finance, there is one such seed, which not only grows into a tree but could become an entire forest — the power of compounding. The magic of compounding is that it starts small but grows exponentially over time.
More than two centuries ago, Benjamin Franklin, the first Postmaster-General of the United States and author of the book Poor Richard's Almanack, echoed this concept saying, 'Money makes money. 'And the money that money makes, makes money.'
Further, highlighting its potential of exponential wealth creation in the long run, famous physicist Albert Einstein said, 'compound interest is the eighth wonder of the world.'
Though the phrase 'the compound effect' existed for aeons, especially in mathematics, it became quite popular in the realm of finance, productivity and personal development after a bestselling book by U.S. author Darren Hardy.
Compound effect
The compound effect is like a snowballing effect wherein a small, consistent action or an investment accumulates over a period, leading to an exponential growth. In personal finance, it refers to the process wherein your initial invested money earns interest, and the interest earned earns interest, which subsequently generates interest, and the chain goes on and on.
This way, you make a gigantic leap from your original invested amount. Not just this, the beauty of the compound effect is that you need not work hard for it, as even if you are sleeping, your invested money will silently work and keep on generating money for you.
You need to give time for it and just be patient. Consistency is the key.
Let's imagine this scenario. God wishes to give a boon and places two choices before you. First – He will clear all your debts instantly, say ₹35,00,000.
Second – He will give you ₹1 on the first day with a promise that it will double every day for one month. So, which one do you choose?
Almost all 10 people would only choose the first option for two reasons. The first being instant gratification and the second is the lack of awareness of compounding effects.
In contrast, mathematicians or financial experts will only choose the second option of taking the ₹1 that doubles every day for 30 days. They do not mind waiting for 30 days, let's find out why.
Money doubles
On day one, God gives you ₹1, it doubles to ₹2 on the second day, to ₹4 on the third day. Likewise, it doubles to ₹512 on the 10th day. Your patience is being tested here.
In a similar doubling strategy, your money becomes ₹16,384 on the 15th day. Time is the secret; time begets money.
On day 20, it would be ₹5,24,288, which is way less from the first choice. But wait, we have 10 more days. On day 24, it would have doubled to ₹83,88,608 and on the last day, it would be ₹53,68,70,912.
In just 30 days, ₹1 transforms into a whopping sum of more than ₹53 crore. You call it mind blowing but that's the power of compounding.
SIP investment
Now, let's take a real-life example. Priya invests ₹1,000 every month in a Systematic Investment Plan (SIP) that gives her 12% Compound Annual Growth Rate (CAGR).
After five years, her investment would have grown to almost ₹82,000. After 10 years, it becomes ₹2,32,000 (approximately) and after 20 years ₹9,99,000.
But wait, the magic has not happened yet. In 30 years, it becomes ₹35,29,000 and in 40 years, a whopping sum of more than a ₹1 crore.
So, just a ₹1,000 in monthly SIP transforms into more than a ₹1 crore in 40 years.
That's the reason all financial experts advise us to start saving right from the first salary, so that, by the time you retire, you would have saved enough, and your money would have worked for you even when you were sleeping.
If you need more money, just step up your SIP amount of ₹1,000 per month by just 10% every year, witness the magic and enjoy your retirement life comfortably and worry-free. Start saving early.
(The writer is an NISM & CRISIL-certified Wealth Manager)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hindu
2 days ago
- The Hindu
Money making money even while one is asleep
If a child pesters his father for money, his usual retort would be, 'Do you think I'm out there shaking a money tree.' Yes, in a way, he is right, you can't just pluck money off a tree. But even a small penny is like a seemingly small seed, which when nurtured and nourished carefully, can be the beginning of a forest. Power of compounding In the world of finance, there is one such seed, which not only grows into a tree but could become an entire forest — the power of compounding. The magic of compounding is that it starts small but grows exponentially over time. More than two centuries ago, Benjamin Franklin, the first Postmaster-General of the United States and author of the book Poor Richard's Almanack, echoed this concept saying, 'Money makes money. 'And the money that money makes, makes money.' Further, highlighting its potential of exponential wealth creation in the long run, famous physicist Albert Einstein said, 'compound interest is the eighth wonder of the world.' Though the phrase 'the compound effect' existed for aeons, especially in mathematics, it became quite popular in the realm of finance, productivity and personal development after a bestselling book by U.S. author Darren Hardy. Compound effect The compound effect is like a snowballing effect wherein a small, consistent action or an investment accumulates over a period, leading to an exponential growth. In personal finance, it refers to the process wherein your initial invested money earns interest, and the interest earned earns interest, which subsequently generates interest, and the chain goes on and on. This way, you make a gigantic leap from your original invested amount. Not just this, the beauty of the compound effect is that you need not work hard for it, as even if you are sleeping, your invested money will silently work and keep on generating money for you. You need to give time for it and just be patient. Consistency is the key. Let's imagine this scenario. God wishes to give a boon and places two choices before you. First – He will clear all your debts instantly, say ₹35,00,000. Second – He will give you ₹1 on the first day with a promise that it will double every day for one month. So, which one do you choose? Almost all 10 people would only choose the first option for two reasons. The first being instant gratification and the second is the lack of awareness of compounding effects. In contrast, mathematicians or financial experts will only choose the second option of taking the ₹1 that doubles every day for 30 days. They do not mind waiting for 30 days, let's find out why. Money doubles On day one, God gives you ₹1, it doubles to ₹2 on the second day, to ₹4 on the third day. Likewise, it doubles to ₹512 on the 10th day. Your patience is being tested here. In a similar doubling strategy, your money becomes ₹16,384 on the 15th day. Time is the secret; time begets money. On day 20, it would be ₹5,24,288, which is way less from the first choice. But wait, we have 10 more days. On day 24, it would have doubled to ₹83,88,608 and on the last day, it would be ₹53,68,70,912. In just 30 days, ₹1 transforms into a whopping sum of more than ₹53 crore. You call it mind blowing but that's the power of compounding. SIP investment Now, let's take a real-life example. Priya invests ₹1,000 every month in a Systematic Investment Plan (SIP) that gives her 12% Compound Annual Growth Rate (CAGR). After five years, her investment would have grown to almost ₹82,000. After 10 years, it becomes ₹2,32,000 (approximately) and after 20 years ₹9,99,000. But wait, the magic has not happened yet. In 30 years, it becomes ₹35,29,000 and in 40 years, a whopping sum of more than a ₹1 crore. So, just a ₹1,000 in monthly SIP transforms into more than a ₹1 crore in 40 years. That's the reason all financial experts advise us to start saving right from the first salary, so that, by the time you retire, you would have saved enough, and your money would have worked for you even when you were sleeping. If you need more money, just step up your SIP amount of ₹1,000 per month by just 10% every year, witness the magic and enjoy your retirement life comfortably and worry-free. Start saving early. (The writer is an NISM & CRISIL-certified Wealth Manager)
Indian Express
5 days ago
- Indian Express
CAG slams toll waiver on Mumbai-Pune expressway during Covid-19 lockdown
The report of the Comptroller and Auditor General (CAG) of India on Compliance Audit released on Friday slammed the Maharashtra government for the irregular revenue waiver of Rs 71.07 crore to the toll operator on the Mumbai-Pune Expressway during the Covid-19 lockdown that was enforced on March 23, 2020. It stated that the waiver granted to IRB MP Expressway Private Limited, entrusted with collecting toll on the Mumbai-Pune highway, during the lockdown period in 2020, violated the agreement with Mumbai Pune Expressway Limited (MPEL), which is owned and controlled by the Maharashtra State Road Development Corporation (MSRDC). As per the sub-concession agreement on February 28, 2020, the IRB was allowed to collect toll for 10 years from March 1, 2020, to April 30, 2030, for a fee of Rs 8,262 crore. The MSRDC granted a waiver to IRB MP Expressway after it pointed out that the toll collection was disrupted during the lockdown, which constituted a 'force majeure' (unforeseen) event. 'The upfront amount payable by IRB to the MPEL was Rs 6,500 crore (due on 01 March 2020 with interest 9.5 per cent per annum, if delayed) while the balance Rs 1,762 crore was payable in the next three years,' it said. The audit report pointed out that Article 25.1 of the agreement prescribed that IRB shall effect and maintain suitable insurance cover at its own cost to cover third party claims and 'force majeure' events that include acts of God, epidemic, earthquake, flood, landslide, cyclone, strikes or boycotts, any court orders, geological conditions, and similar circumstances of nature. 'Force majeure' refers to the clause that frees both parties of liabilities in case of such catastrophic events. The agreement provides that the parties shall bear their respective force majeure costs in case of any loss arising due to the occurrence of such non-political events, and neither party shall be required to pay to the other party any cost thereof. The report stated that the IRB, however, did not insure its business for force majeure events. 'IRB requested (24 March 2020) MPEL to bear the losses of toll revenue and grant a waiver in the sub-concession fee. MPEL rejected (09 April 2020) the claims, citing the relevant clauses pertaining to non-political force majeure events. Thereafter, upon continued requests from IRB to consider their case for suitable compensation, the Board of Directors of MPEL, in its meeting on April 20, 2020, agreed to provide compensation based on the computation of revenue loss for 25 days in toll collection. The amount of compensation was worked out to Rs 71.07 crore, as prescribed by the Board,' the report said. 'Thus, payment of force majeure cost of Rs 71.07 crore by MPEL to IRB was in contravention to the provisions of the Agreement and undue favour to IRB to the said extent,' it said. Following the dispute, a mediation report dated October 13, 2023, advised IRB to remit the amount of Rs 71.06 crore to MPEL. The government stated in December 2023 that the recovery of Rs 71.07 crore has been initiated and that MSRDC has been directed to recover Rs 71.06 crore from the contractor within three months, the audit stated.
News18
6 days ago
- News18
Techie Alleges No Support By Employer After Family Tragedy As He Is Denied WFH
Last Updated: After his father's death, an Indian IT employee was denied extended remote work to care for his grieving mother. A post by an Indian IT employee has gone viral online. It shows how some workplaces lack empathy during times of personal loss. The tech professional shared his story on Reddit. He lost his father and has been struggling with both grief and his job. He said he took five days off when his father was in the hospital. After his father passed away, he worked from home for a week to complete rituals. Later, he asked for one more month of remote work. He wanted to stay with his mother, who is now alone in their hometown. But the reply he got from the client manager was shocking. 'The client manager simply said, 'Finish the rituals and please plan to proceed ahead.' Which basically meant—get back to the office," he wrote on Reddit. He works in a service-based IT company and is assigned to a client. He said his request was denied without any discussion. He even tried to explain his situation over a call, but no one responded. His own manager also didn't support him. Now, he's stuck between taking care of his family and doing his job. He asked Reddit users how they would handle something like this. The post was shared on July 16 and it got over 300 upvotes and many emotional responses. Some people were shocked by the company's cold attitude. Others said this happens often in companies where client work is the top priority. A Redditor said, 'Very sorry for your loss. As the top comment said, don't seek permission. Just inform them you're taking the time off. Whatever happens will happen. Your family should be your priority." Another user wrote, 'This is inhumane. Sorry for your loss, OP. During my layoff, the email that the head of our company sent mentioned that I am taking too many leaves. The last leave I took is in February when I came to see parents. These a**holes ain't gonna change." 'I think WFH has become a luxury in India, better apply for leaves and carry out rituals. Then, once you're okay, join back. Very sorry for your loss, May God give you and your family strength," someone else added. This post has sparked a fresh debate about India's poor bereavement leave policies. Many feel that employee well-being should come before client delivery. People are now demanding proper guidelines for compassionate behaviour at work. view comments Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
