To many young people retirement seems a long way off with plenty of time to start thinking about planning later. But if you’ve ever heard the expression, said with regret, “If I knew then what I know now…” think about it seriously and consider what the consequences could be of leaving retirement planning too late. Start saving now and avoid regret and a poor lifestyle later.
Let’s take a look at an example of the early saver versus the late saver. The use of the magic of compound interest will astound you…Albert Einstein called compound interest the “eighth wonder of the world”.
Jacqui and Carrie are old school friends. After attending university together they decide to travel overseas. Carrie spends the next 11 years working and living overseas but after a year away Jacqui returns. Jacqui starts a new job and saves hard for her new home. At the same time she is putting money aside for long-term goals. It’s only $100 a month as she puts everything else into her home account. She receives an average of 7% p.a. on her money over the lifetime of the investment. After 10 years Jacqui stops her investment but leaves it to gain interest.
In the meanwhile Carrie returns and starts her saving plan of $100 a month. She saves regularly for the next 30 years earning the same rate of return as her friend Jacqui. This is what each of their savings looks like:
- Jacqui in year one has $1,242 and by year ten has accumulated $17,160 before she stops investing any further. Carrie has no investment by year ten.
- Jacqui has invested no more money but by year 40 has accumulated $130,626 while Carrie has only achieved $117,320 in year 40 (having started investing ten years after her friend). A difference of $13,306.
- Jacqui has only paid in $12,000 over 10 years but Carrie had to invest $36,000 to achieve her total sum invested and she has saved for 30 years!
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When it comes to expanding your business overseas, franchising has become the Modus Operandi of the day. In Singapore, many businesses including restaurants, café chains and fashion chains have shown interest in and considered setting up overseas franchises. It makes sense financially for them in the sense that the franchisor (the business owner that grants the franchise) can charge an initial fee to the overseas franchisee (the person who takes the franchise). Franchising in effect provides an almost cost-free expansion since the original business receives royalties and a constant stream of income from the franchise. But there are pitfalls to avoid. Franchising may not be suitable for all businesses and an overseas operation can fail for a number of reasons.