Yesterday I was reminded again why I love what I do. I had the opportunity of reconnecting with one of my favorite clients, who I consider a good friend. She had been away working overseas for the past year and we met up for lunch to catch up and review her portfolio.

I was so happy to show her that since we moved her funds (money that was just sitting in an RRSP at her bank, earning next to nothing) over to a proper investment; she has earned over $3200 in interest! This is the interest her money earned for her just from being properly invested. She was smart enough to realize that in order to get ahead, she needed to have her money working for her. We can never guarantee any returns, but I am happy to report that this $3200 represents a 9% return from the past year!! Using the rule of 72 (explained below) at this rate of return, she will double her money in just 8yrs.

The most common misconception about investments and wealth is that it takes money - a lot of money - to get started. This is SO not true! Anybody can invest, and I urge everybody to invest into a TFSA and an RRSP, to take advantage of significant tax savings and to get your money working for you. Whatever you have is much better than nothing. Most importantly, if you have more than $1,000 sitting in a bank account - you are not being very smart. So don’t waste another day, get smart today!

For most people, financial freedom comes from starting early, working with a professional, and investing every extra dollar they have into a growth account.

The magic of compound interest, an example:

Investment:             $200/month
Length of Time:        20yrs
Interest Rate:           6% interest*
Total Investment Value after 20yrs:  $92,870
You would have only actually invested $48,000 - and you would have made an extra $44,870 from interest alone!

Of course the more you invest monthly (or yearly) and the earlier you start, the more interest you will earn.

Investment:             $400/month
Length of Time:        35yrs
Interest Rate:           6% interest*
Total Investment Value after 20yrs:  $572,733
You would have only actually invested $168,000 - and you would have made an extra $404,733 from interest alone!

*future interest rates are never guaranteed

THE RULE OF 72:

If you divide 72 by the expected interest rate your investment will earn, this will give you the number of years it will take to double your money.

Example:
Initial investment = $10,000
Interest rate = 6%
Number of years to double = 72/6 = 12yrs
So in 12yrs your $10,000 will double to $20,000

The reverse is also true, if you want to know much interest you need to earn in order to double your money in a specific amount of time, say 10years.

Initial investment = $10,000
Desired number of years to double = 10yrs
Interest rate needed = 72/10 = 7.2%
So your investment would need to be earning 7.2% interest in order to double in 10yrs

Get SMART today and get your money work for you!