Azedah Jamil, ChFC

By Suhaila Kani

Since my last article on financial planning, I have had people relating to me stories of how a 20-year-old is able to make payment in cash for a newly purchased car, or how an individual gets $30,000 from his parents.

I have also had parents telling me how their children (aged below 15 years) already have $10,000 or more nicely tucked into their savings.

You readers may likely respond by saying, "Yeah, that's easy for them because their parents are rich."

However, I would like to point out to you that these stories actually come from ordinary people like you and me. The truth is we can all become rich, given we possess both the right attitude and techniques.

In the last few articles we touched on the basics of financial planning - planning your money to achieve your dreams and, most importantly, your deepest desires in life.

Now I can already hear you asking, "So how exactly were these 20-year-olds able to purchase their cars in cash, or get such a lump sum from their parents?"

How can a normal regular earning income person afford to give their child that much money?

Did they invest in the stock market, reaping the rewards in a short period of time?

Did they take on a certain kind of business that spelt instant wealth?

You will be surprised to know that it is in fact none of the above. There are many examples I can offer towards achieving such wealth, however, I will only limit it to two.

Curious are you? Then read on

In life, some may not be as lucky as others. Not many people win big money everyday. We are ordinary people living ordinary lives, working hard to make ends meet.

However, you'll be surprise to know that saving as little as $1 a day can bring you a long way.

The people to be credited are the parents. Their dedication towards saving - everyday, every month or every year - a small fraction of their salaries for their offspring (ever since they were young) made it possible for them to cough up a lump sum for their children.

Some saved as little as $1 a day, while others saved as much as $100 a day. The moral of the story here is that you don't have to be rich to have the large sum of money given to you. All you have to do is to commit yourself to saving $1, $5 or even $10 a day.

If you are already in your 20s and your parents haven't saved enough for you, don't fret. It really isn't the end of the world.

At this tender age, you still have plenty of time to save either for your family, children or retirement. Five, 10 or 20 years down the road, you would probably be glad you did. So go on, plan now to save for you and your family.

If you are still wondering if it is possible to save as little as $1 a day and receive a large sum later on in life, allow me to clear your doubts.

Let's say you save $1 a day for your newborn, putting it into a savings account which offers a four per cent annual return. By referring to Diagram A, you will be able to see how the savings would mature over the years.

By the time your child is 25, you as a parent will be able to give your child about $15,000.

Assuming parents save $3 a day instead, they will be able to provide their child $46,000 by the time that child turns 25. (Refer to Diagram B)

This indeed is achievable for ordinary people drawing ordinary incomes.

Note the difference in figures by merely throwing in an additional $2 daily over the 25-year period. The difference of $31,000 is significant.

It just goes to show how if you are able to save more than $2 or $3 a day, your wealth will grow more exponentially. This is due to the compounding effect of the interest earned.

Let's throw in another example to the mix. By consistently saving $5 everyday, in 20 years time you should be fairly proud of your savings. (Refer to Diagram C)

Here is a tabulate of the difference:

$1 a day ---------------- $15,423.89

$3 a day ---------------- $46,271.66

$5 a day ---------------- $77,119.43

Can you see the difference now? Imagine cutting down on the daily 'nasi katoks' and putting that money aside for the future. Note: Over 25 years, those nasi katoks would cost you $15,000.

This is only a metaphor but you can relate this to other things like smoking. Cut down on your cigarettes or kick the habit and instead channel the spending towards getting your wealth intact. That $3 price tag will cost $46,000 over 25 years, which you could instead put into your child's education fund or even as down payment for your home.

So decide now to improve your financial future. Many people may say that saving a dollar a day will get them nowhere, but the truth is, it sure is better than nothing. It will be a good starting point for you to save. If you can afford to save more, then do so.

Either ways, you will later see the difference. Change your daily spending habits, choose now to be time to take better care of your financial future.

Remember, the sooner you start saving, the sooner you will reap your rewards.

Courtesy of Borneo Bulletin