The only way to grow wealth is to find compounding machines. However, you need to understand the power of compounding so as to maximise the benefits. My goal is to show you the best compounding machines. Further, I will share tools and templates to help with the investment decisions.
I advise that you find a quiet place and watch the video below from start to end. Trust me, it will open your mind about how you think about money!
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This will be a comprehensive guide over the next few weeks. I am a believer in the power of tiny actions after reading this excellent book.Therefore, this guide is broken into short and actionable lessons. Bookmark the link to the article. I plan to share more insights as time passes. So you don’t want to miss out!
Compounding Machine 1: Money Market Funds (MMF)
Benefits of opening a money market account
- Earn a higher return compared to savings accounts.
- Access your investment within 1-3 days. Unlike a fixed deposit, there are no penalties for early withdrawal. Personal finance experts recommend at least 6 months worth of expenses saved in an emergency fund. Due to their liquidity, money market funds are a great place to save for emergencies.
- The chances of losing your money are low as they invest in low risk and short term instruments.
- Your money starts working for you. This is because interest earned is automatically reinvested each month. This is an example of compounding. At this point, I want to show you how small amounts can grow due to this compounding effect:
How to use and interpret the chart
- The first green box in each row shows the number of years it will take to accumulate a million shillings. This is based on your monthly contributions and initial investment.
- For example, if your kid’s education will cost Shs 1 million in 5 years time. Then start contributing Shs 15,000 each month.
- The above illustrates the power of tiny amounts invested consistently.
- For example, Shs 2,500 (minimum you can invest in the Sanlam MMF) will grow to Shs 1.5 million in the next 20 years. Therefore, time is your friend.
- If you are in your 20’s and plan ahead today. Then a Shs 2,500 contribution would grow to over a million shillings by age 40!
- One would need to double the contribution to Shs 5,000 (minimum you can invest in the CIC MMF) if they start in their 30’s.
- Use the chart above to decide the initial amount and monthly contribution needed to achieve your target. Complete the preferred signed form between Sanlam and CIC. Then send the completed forms to firstname.lastname@example.org
- For those with MMF accounts, the above is motivation that you are on the right path.
Future lessons on compounding
- How to use the other compounding machines in Kenya to grow wealth.
- YouTube video series on the power of compounding.Content will be exclusive to YouTube subscribers.
- How to catch up with compounding if you didn’t start in your 20’s.
- A story of my real life investing decisions.
- Other insights as the series continues.
- Can’t wait? Download the free audiobook and join the current lesson!
Other Valuable Guides
Here are links to other valuable content on this blog:
- Complete step by step guide to PayPal in Kenya
- Here is the link to the Free Personal Finance Lessons for Kenyans. The first 10 free lessons are ready for your learning!
- The Comprehensive Guide on How to Earn Money in Kenya
- Below are some short and sweet personal finance and investing lessons. Watch. Learn. Enjoy. Share.