A Tip That Will Help Your Investments Grow

by Pam on October 30, 2009

index your investment contributions to inflationHere’s a quick investment tip for you that will help your investments grow. When you set up preauthorized payments towards your investments, it is really important to make sure that you increase your contributions by at least 3% each year to keep up with inflation.  Although you may think it’s not necessary, the impact on the growth of your investments is significant.  All you need to do is contact the institution that holds your investments once a year and ask them to increase your contributions by a few dollars.

To illustrate my point, if you contribute $250 each month into an investment account for 30 years and you increase your contributions by 3% each year, in 30 years your investment could be worth as much as $341,179.  However, if you contribute $250 each month for 30 years and do not increase your contributions to keep pace with inflation, your investment will be worth approximately $243,927, which is almost $100,000 less!

Although inflation is often hard to notice from one year to the next, it becomes very apparent over a timeframe of ten years or more.  For example, what cost $100 in 1998 would cost $131.52 in 2008. Also, if you were to buy exactly the same products in 2008 and 1998 they would cost you $100 and $77.68 respectively.

You can find more examples and get a better understanding of the effects of inflation over time by checking out the Inflation Calculator at http://www.westegg.com/inflation/.

Don’t forget to give your financial institution a call in order to increase your contribution amounts.  You won’t even miss the extra couple of dollars you contribute, and your investments will grow a lot more as a result.

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