Question

Money investment option which is better and why?

1. Is it more important to put more money into a low-interest savings account a week/month/year OR
continue putting money into the account for a longer period of time?

2. Double interest rate and doubled time period will result same value of money? of which is greater?

Answer 1

Answer : 1) Putting money for longer period of time gives the advantage of compounding as you earn interest over interest earned, resulting in exponential increase in the money accumulated. On the other hand, on putting more money for short duration, here you lose the compounding impact.

So, putting money for longer period of time will help more and is a better investment option

2): Yes, apply the 72 rule in finance you will find that doubling interest rate or doubling time period has the same effect and will result in the same value.

Example : lets say you are getting 10% interest rate and your time period is 7.2 years and investment amount is 10 million.

On applying 72 rule, we will double our amount in 7.2 yrs.

now lets say we double interest rate to 20% it will become 40 million in 7.2 yrs

and if wee double time to 14.4 yrs and interest rate at 10% it will become 40 million in 14.4 yrs the same value.