Why Consider Investing?
Learn how investing can make your money work for you.
Style Magazine Newswire | 4/6/2018, 10:11 a.m.
By Wells Fargo
Investing early on is a forward-thinking way to potentially grow your money and meet your financial goals. Consider these three ways your money can work for you:
1. Keeping ahead of inflation
A key reason to invest is to try and keep your nest egg growth faster than rising inflation rates. Based on the Consumer Price Index (CPI), inflation rates reflect the rising costs of basic needs, such as food and clothing. Consider this: $20 in 1980 had the same buying power as $58.50 in 2016.1 If you invest, you have the potential to grow your savings at a similar or higher rate – making it easier for you to afford your expenses when you retire.
2. Compounding growth
When you select an investment with compounding interest, your earnings take on a cumulative effect. With compound interest, the interest accrues on both the principal and the previously accumulated interest – as opposed to simple interest, where only the principal earns interest. To learn how to calculate compound interest, imagine you’ve invested $1,000 for a year at a five percent rate. You would make $50 in that first year. But in the second year, you’d multiply $1,050 by 1.05 to get the new total, $1,102.50. With compounding interest, each year more interest accrues than in the previous year. The longer it stays invested, the more its value has the potential to grow.
3. Matching Contributions
A matching contribution is a type of contribution an employer chooses to make to his or her employee's employer sponsored retirement plan.2 Nationwide American employees are passing up an estimated $24 billion annually in employer matching contributions by not saving enough to receive their full employer 401(k) match.3
Getting started with investing is easy. If you learn about the basic types of investments and find the right advisor, you can begin making more informed financial choices for the future.