We recently came across this interesting post on Quora where an enterprising young gentleman (a college student ) asked this question : I’m a 21-year-old engineering undergrad. I freelance and make close to 15k a month. Apart from funding my education, how can I put my money to best use?
We were thrilled on two accounts:
- Young students in India are starting to earn money while they are still learning.
- They also want to learn how to put the money to best (and hopefully grow it )
We answered that since he is making 15k per month, he could spend 5k and save / invest the balance of 10k. We also laid out the following scenario:
If this is an amount that he earns on a regular basis, then one of the options he can consider is to start a SIP of 10k per month. Increasing at a rate of 10% every year, and with a return of 15% (doable with long term equity), here is what his savings will look like at various points in his life:
- 25 yrs: ~ Rs 11 lakhs (seed capital incase he wants to startup)
- 35 yrs: ~ Rs 1.1 crore (again if he wants to startup and buy a house)
- or Rs 60 crores by the time he retires at 60 yrs of age.
All because of the beautiful power of averaging, compounding and STARTING early.
Someone commented on the thread asking how we got the figures above. The graphic below explains how we arrived at the figures.