Money Comfort Zone
March 2008 - Tammy Buss

The one comment I get repeatedly when people learn that I work in wealth-creating, preserving and distributing business is,“If I had any money I would come and see you.” I then have to go over the meaning of the word “create.” I looked it up and the definition is: “to make or cause to be or to become.” That is what I do. I help people make wealth. Once it’s made, I help them preserve it (preserve: “keep or maintain in unaltered condition; cause to remain or last”). Finally, I help them distribute it and we all know what that means.

Getting back to creating, it really isn’t that difficult. You don’t need to have a large amount to start; remember that you’re creating. We can all find a few dollars in our monthly budgets and the charts below show you how fast those dollars can add up (based on five and 10 per cent rates of return, respectively).

The five per cent rate is along the lines of term deposit rates and the second chart is more along the lines of returns from investing in mutual funds and stocks. Wealth can be created by depositing more money each month or taking on more investment risk. Most people like a combination of the two. They don’t like the lower returns generated by term deposits but they don’t want the fluctuating returns of the mutual funds, so they combine the two into a stable but higher returning portfolio. Before making a decision about how much and what to invest in, talk to your financial advisor; they can help you choose based on your risk tolerance and comfort level.

Tape these charts to your fridge to remind yourself about the advantages of investing earlier. The charts are also great for teaching children the advantage of starting to save now and how interest rate compounding works. It doesn’t matter if they’re saving part of their allowance or money from a part-time job; it all adds up.

Everyone can benefit from learning the advantages of saving early. One of the best things you can teach your children is about the value of money and how to manage it. They’ll use that knowledge all through their lives. Just ask my 10-year-old how much interest he earned this month on his savings, and then ask my 12-year-old. Some are better than others, but at least they have savings!

Another good application for these charts is for those of you who have small children and want to save for their education. Figure out how much you want in 20 years and then figure out what you have to set aside. If you want $20,000 after 15 years then you either have to save $75 per month for 15 years, assuming five per cent, or $50 for 15 years at 10 per cent. Which would work best for you? Your advisor can help you figure this out.
The most important thing is that you start saving. It doesn’t matter how much you set aside, just start!