Whether you’re saving for retirement or simply trying to build wealth for the future, being strategic with your money can help maximize your earnings. It’s easier than you might think to double your money, and these three strategies can help you increase your savings with little-to-no effort on your part.
1. Take advantage of matching contributions
If you have access to a 401(k) and your employer offers matching contributions, this is essentially free money. By contributing enough to earn the full match, you can instantly double your retirement savings.
Over time, the employer match can add up substantially. Say, for example, you’re earning $50,000 per year, and your employer will match your 401(k) contributions up to 3% of your salary — or $1,500 per year. Let’s also say you’re earning an 8% average annual return on your investments.
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At that rate, that $1,500 per year will amount to around $170,000 after 30 years. After 40 years, it would amount to roughly $389,000 — and that’s not including your own contributions.
2. Let compound interest do the work for you
Compound interest is essentially when you earn interest on your interest. It can help your money grow exponentially over time. When you take advantage of compound interest, you can effortlessly double your money.
For example, say you invest $1,000 right now and you’re earning an 8% average annual return on your investments. Even if you don’t make any additional contributions, you’ll double your initial investment in around nine years.
If you want your money to grow faster, you can invest a small amount each month. Say that in addition to your initial $1,000 investment, you also invest $100 per month. Assuming you’re still earning an 8% average annual return, here’s approximately how much you’d have over time:
- $2,000 in less than one year
- $8,500 in five years
- $19,500 in 10 years
- $60,000 in 20 years
The more time you give your money to grow, the more you’ll earn. After a few decades, you’ll be doubling your money over and over again.
3. Buy during market downturns
While it may sound counterintuitive, market downturns are one of the best opportunities to buy. This is because stock prices are lower, not only giving you the chance to buy quality stocks at a discount, but also creating more opportunities for growth when the market eventually rebounds.
If you only invest when the market is thriving, you’re buying when stocks are their most expensive. You can still earn a significant amount over time, …….