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How Much To Save A Day To Become A Crorepati. You Will Be Surprised!

If you start early, you can accumulate big wealth even with small amount of saving.

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How Much To Save A Day To Become A Crorepati. You Will Be Surprised!

In case of compounding, the longer will be the tenure the more will be the interest component


Highlights

  1. Starting early may help you save big corpus even with small amount
  2. Effect of compounding increases with the increase of tenure of investment
  3. Saving just Rs 100 a day can help you accumulate Rs 1 crore in 30 years
Accumulating a corpus of Rs 1 crore is a dream for many. But many individuals who are in their early twenties don't follow a systematic investment habit, thinking that they will start when they earn more. But you will be surprised to know that you don't need to save a lot of money every month to accumulate Rs 1 crore, provided you start early.
 
Time required to earn Rs 1 crore              Monthly Investment Required
6%8%10%12%
20 YearsRs 21,535Rs 16,864Rs 13,060Rs 6,596
25 YearsRs 14,358Rs 10,445Rs 7,474Rs 5,269
30 YearsRs 9,905Rs 6,665Rs 4,387Rs 2,832

As you can see in the above table, you need to save Rs 16,864 every month to accumulate Rs 1 crore wealth in 20 years if your wealth grows at a compounding rate (quarterly compounding) of 8 per cent. In this case, you contribute around Rs 40.47 lakh to accumulate savings of Rs 1 crore in 20 years and the remaining comes from the interest component.

To accumulate the same Rs 1 crore in 30 years at 8 per cent return, you need to save Rs 6,665 every month. But in this case, you contribute only Rs 24 lakh to accumulate Rs 1 crore wealth with the remaining Rs 76 lakh coming from interest component. This happens because of the power of compounding, which means your interest earns interest for you.

In case of compounding, the longer will be the tenure of investing, the more will be the interest component. So if you start early, you can accumulate big wealth even with a small amount of saving.

As shown in same table above, if you increase the return expectation to 10 per cent and 12 per cent then you need to save only Rs 4,387 and Rs 2,832 every month respectively for 30 years to accumulate Rs 1 crore. You have many investment options to start with, with fixed deposit being the safest. However, in today's falling interest rate scenario, you cannot expect more than 6-7 per cent return from fixed deposits. Also, you have to factor in the income tax implications. The interest rates on small savings schemes are also declining over the past few years.

But if you can cope with higher volatility, you have other options like equity mutual funds, balanced funds and hybrid funds which can generate higher returns over the long term. Financial planners say that those in their early careers can take some exposure to equity funds and gradually reduce it as they approach retirement.


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