I am not a student, but could use help to prove a point.

[GarlicGuy]

I don't know anything at all about how this math is done, but I am trying to help someone understand the power of monthly investing.

Scenario:

Person invests 100 per month every year and averages 6% interest. He does this for 50 years. He starts at age 18.

How much money will he have when he turns 68 years old.

And what if he averages 8% ( which I think is the average annual return for stocks ) ?

 

[stapel]

I don't know anything at all about how this math is done, but I am trying to help someone understand the power of monthly investing.

Scenario:

Person invests 100 per month every year and averages 6% interest. He does this for 50 years. He starts at age 18.

How much money will he have when he turns 68 years old.

And what if he averages 8% ( which I think is the average annual return for stocks ) ?

To learn about the compound-interest formula, try here.

 

[GarlicGuy]

Since he AVERAGES 6%, then you simply use $1200 as annual
deposits, and use 50 as number of periods.

No need to be overly precise; ballpark is all you need.

Well, no... that would not prove the point of compounding would it? I am terrible at math, but I think there would be a gigantic difference between the way you have it, and the way it needs to be done to prove my point.

 

[GarlicGuy]

To learn about the compound-interest formula, try here.

LOL, heck no.... I am 53 years old and math challenged at best!

 

[GarlicGuy]

Since he AVERAGES 6%, then you simply use $1200 as annual
deposits, and use 50 as number of periods.

No need to be overly precise; ballpark is all you need.

I don't think so. The compounding is what will make it seem worthwhile to him.

 

[GarlicGuy]

Where did I say there's no compounding?
You said "averages" 6% annually; that's why
I suggested 1200 annually, since annual
result is 6%; BUT there is ANNUAL compounding:
1200(1.06^50 - 1) / .06 = 348,403
1200 * 50 = 60,000 ; total interest of 288,403

With no compounding, interest would total 91,800

Well something is not right.... I was shown a compound interest calculator online, and it came out as about $550K.... and it was shown to me by a college math student, who also did the calculator and got the same answer.... Who is wrong? I don't know.

 

[Deleted member 4993]

Well something is not right.... I was shown a compound interest calculator online, and it came out as about $550K.... and it was shown to me by a college math student, who also did the calculator and got the same answer.... Who is wrong? I don't know.

Unless we don't understand some basic premise of the problem, I agree with Denis. Even with monthly compounding the total comes out to be 378719.11.

Daily deposit of 3.33 (3.34 every fourth day and assuming there are 360 days a year) - you would have 381610.33.

Daily deposit of 3.33 with 7% interest and daily compounding will take you to 550357.49 in 50 years....