How compounding works in favour of first-time jobbers

The adage ‘well begun is half done’ works well in case of first-time jobbers, who realise the importance of financial planning from the early stages and begin saving from their first pay cheque itself.

The healthy habit of saving in early stages of life pays off in the long term. People who save at least 10% of their salaries every month do accumulate enough funds that can save them from rainy days.

But this is not enough. In a bid to achieve your goals such as buying a new car, house, supporting your parents or going on an exquisite holiday, you have to make your savings work, which can happen only by investing.

Turning savings into investments from first salary can create long-term wealth that can help you attaining things that money can buy.

When you start investing early, your wealth gets compounded and after 10-15 years, what you have will be a huge corpus of amount.

This is known as the magic of compounding, or power of compounding, as the interest generated on the principal is added back to the principal. This takes time value of money in account. So, if you invest in equity and equity-related mutual funds, you can create a good amount that can beat inflation.

You can choose schemes that compound interest and grow your money over a period of time. For instance, if you invest Rs 1 lakh for five years with an interest of 10%, you will generate Rs 1, 61, 051. Here, you can further invest profits earned from this investment.

Several investment tools such as PPF, mutual funds with growth option, etc., can generate wealth for you.

Albert Einstein once said ‘compound interest is the eighth wonder of the world’. If you start early, from the first pay salary, you will be able to make investment decisions wisely.