Personal Finance 101: What can RM500 monthly do for you at the end of 30 years?

Personal Finance 101: What can RM500 monthly do for you at the end of 30 years?

What can RM100 buys us today?

MyFM radio station was asking listeners how many meals they could have with RM100. One particular man called in and said that when he eats ‘economy rice,’ he just take one meat, one tofu and one vege and that’s already over RM20. I was shocked. Where is this place? Anyway, I did not listen until the end and I did not know but RM20 for ‘economy rice’ is probably too high if you ask me.

This evening, after picking up my children, I also took economy rice. One meat, two types of vegetables and it came to RM9.70 Yeah, this particular economy rice restaurant has recently increased its price. That’s why they have probably 20 percent lesser customers. Previously, I could hardly find any empty table but these days, I usually could see a few empty tables easily.

It does seem that RM100 may not buy that many meals these days, hardly enough for 10 days of dinner. What will this RM100 become 30 years later? I think value wise, it could have easily lost half if not more of it’s purchasing power. This is due to INFLATION. This is also the reason why we must save… and invest what we have.

Why is this RM100 kept becoming smaller?

My mother told me that laksa used to be just 10 sen when she was young. 🙂 Here, we are talking about RM100 and we think this RM100 is getting smaller. All these are happening because of inflation.

Inflation is defined as a sustained increase in the general level of prices for goods and services.  (Source: investopedia.com)

The lower the value of money, the higher the amount we have to pay in order to get the same value.

Since RM100 is too small, how about RM500? What could it become say 30 years later?

Well, if we consistently save RM500 under the bed, it will turn into the following:

RM500 x 12 (months) x 30 (years) = RM180,000

Not too bad but we need to remember that probably the value of this RM180,000 30 years later would be similar to the value of RM90,000 today. So, more importantly is to ensure this RM500 saving can continue increasing in value. First thing is NOT to put the money under the bed yeah. there’s even a chance that the money could be eaten away by termites too.

Consistency is the key to positive financial outcome

This is what RM500 monthly could do for you at the end of 30 years if the return is just based on FD rate of 3 percent. We assume you have saved for 2 years and will start with RM5,000 in Fixed Deposit. We also assume the FD rate stays the same. Actually, the probability is that it will move higher but never mind, let’s be very conservative. We can see just with 3 percent compounding interest, the total will be an extra RM123,000 versus just saving it under the bed every month.

This is why savings is important

“The future is unpredictable, and financial emergencies can crop up anytime. Saving money allows you to create a safety net for your future expenses as well as unplanned financial needs. The more you save, the more peace of mind you have, as you are better prepared for anything life throws at you.” Source: iciciprulife.com

84 percent of Malaysians do not have monthly savings… News in sinardaily.my

“The majority of respondents (55%) have less than RM10,000 in available savings to draw on in the event of an emergency. This suggests that many Malaysians may not be adequately equipped to withstand financial shocks.” Source: pidm.gov.my

Thanks for noting all these facts and hopefully take appropriate actions too. Our future depends on what we start doing today.

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