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Consistent
investments over a number or years can be an effective strategy to accumulate
wealth. Even small additions to your savings add up over time. This calculator
demonstrates how to put this savings strategy to work for you!
Definitions
- Starting
amount
- The
starting balance or current amount you have invested or saved.
- Additional
contributions
- The
amount that you plan on adding to your savings or investment
each period. The investment period options include monthly,
quarterly and annually. This calculator assume that you make
your contribution at the beginning of each period.
- Years
- The
total number of years you are planning to save or invest.
- Rate
of return
- The
annual rate of return for this investment or savings account.
Historically the major stock indexes have averaged 11% to 12%
per year. If you plan on withdrawing your money within five
years, you may wish to choose a more conservative rate of return.
An ordinary savings account earns 2% to 5%.
- Compounding
- This
is the frequency that your investment's interest or income is
added to your account. The more frequently this occurs, the
sooner your accumulated interest income will generate additional
interest. For stock and mutual fund investments you should choose
'Annual'. For savings accounts and CDs all of the options are
valid, although you will need to check with your financial institution
to find out how often interest is being compounded on your particular
investment.
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Information
and interactive calculators are made available to you as self-help tools
for your independent use. We cannot and do not guarantee their accuracy
or their applicability to your circumstances. We encourage you to seek
personalized advice from qualified professionals regarding all personal
finance issues.
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