How to become a multimillionaire for retirement, saving 3 thousand rubles a year

The power of compound interest

In a previous article, we looked at how to naturally make millions in the stock market. It's all about the secret of compound interest.

As I explained, the point is that you make money from the money that you have already earned. And the more money you make, the more profit they will bring you. There is real power in this idea. If you invest 100 thousand rubles at the age of 30, then by the time you retire you may have 15 million.

Although taking into account inflation, this may not be so much. Therefore, today I will reveal to you the real secret of how to create wealth using compound interest.

This secret is almost as simple as the principle of compound interest itself. It also does not apply to methods full of drive and adrenaline, but it can create significant capital for investors who follow it. I saw this in a family I know from the United States, where both father and daughter used him to create a secured pension.

My father was an outstanding physician, very attentive to his patients. But also a terrible investor. He often succumbed to the greed and fear so characteristic of the stock market. Sometimes he liked to buy on the advice of friends from conversations in the bar. But, fortunately, for this he had a special trading account "for games", and he was not too worried about losses. With his retirement account, he acted fundamentally differently and applied a strategy that can make anyone rich.

His daughter also followed this strategy. Today she lives in a house overlooking the mountains with her husband and two sons. They have enough money to enjoy life and pursue their hobbies. She is very grateful to her father for telling her about this secret at an early age.

You can see how this strategy works in the chart:

The green bars show the result of the approach from the previous article. It really works: 100 thousand rubles turned into 10-15 million. But look at the other charts.

The yellow bars illustrate the father's approach from our example. He started investing at the age of 30 and then every year he saved a little money for it. Of course, I do not have exact numbers, but for the example (adapted to rubles) I assumed that he could also deposit 100 thousand rubles at first, and then replenish his investments by 50 thousand rubles a year.

You can see from the graph that, continuing to act in this way, by the age of 50, he had already accumulated about 10 million. This is almost eight years faster than in our first example.

By the age of 55, he already had 20 million, and by the age of 58 - about 39 million.

Just think about it. You start at the age of 30 and receive an annual return of 18% (the average return on the Russian MICEX index over the last 16 years) by investing in a basket of shares of the largest Russian companies. You start with 100k and contribute just 50k extra every year. And by the time you retire, you have almost 40 million.

Let's now look at the blue bars that show the daughter's results. Her main advantage is that her parents explained these principles to her in childhood and from the age of 10 they began to form her personal savings. For example, I will also adapt all the numbers to the ruble reality. The first installment was 20 thousand rubles. Then she herself took part in the process and, with the help of her parents, put aside 3 thousand rubles a year.

When her daughter grew up, she did not have a high-paying job and she continued to save also only 3 thousand a year, but she did it regularly.

On the chart, we see what happened to her savings, which began to form since childhood, but at the same time in very small amounts. By the age of 44, she had accumulated 10 million.

By this time, 102 thousand rubles were invested in her investment account, and 9.9 million were earned. If she waits another five years, then by the age of 49 she will have 20 million.

This is an impressive result from an investment of 117 thousand: the total return is about 17,000%.

Further, the numbers become completely incredible. By the age of 55 (the retirement age for women in Russia), she will have more than 70 million rubles, that is, more than $ 1 million. Even with a bank rate of return of 8% per annum, this amount will bring her more than 450 thousand rubles per month in interest. What do you think is a decent pension?

conclusions

What do these stories tell us? Father's story shows that it doesn't take you 50 years to get results from compound interest. But her daughter's story proves that the more time you have, the more incredible the result it can give.

I invite you to share this secret with your family and friends. If you have children or grandchildren, it is important for them to know about saving and investing. A good way to tell this is the story of a daughter from today's family who was able to become a multimillionaire by saving very modest sums every year from an early age.