The Hidden Power of Savings

Here we are going to analyze the different ways of saving which is possible to develop inside of the established financial system. When we refer to savings we will do so thinking that the objective is to form a capital in the long term, where the amount is so important that it can even give us freedom to live of it. Therefore, for short term savings that has the objective of providing us with small likes, many of the affirmations would be valid, but they will not be analyzed. Since it will be taught, without a lot of enthusiasm in school when we were little, there are two ways of saving so that it grows in time.

Initial fixed amount, only once
This system refers to destining an initial amount and keeping it for a long time, long term placed in the “system” at a convenient interest rate. This system does not consider savings payments in a monthly basis, but it is the case of the typical person that gets an important amount of money and desires to do something more with it than to just spend it on consuming all of the nice and attractive products that are advertised. For example:

F = I * ( 1 + r 7 100 ) ^ ( n * 12 )

I = Initial amount, expressed in US dollars.

F = Future Value, expressed in US dollars.

r = monthly interest rate, expressed in %.

n = number of years.

As can be seen, the future value is directly proportioned to the initial savings amount.