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lets pretend there is a guy aged 25 and he wants a million in his bank account before he reaches 66 years of age.the bank tells him that the rate of interest will be fixed at 3% per year.question=how much must he save per day to get his million.even a ball park figure will do for the answer,the interest + compound interest is confusing me,and leap years don't help neither.but someone out there might have a calculator that works interest rates.thanks in advance.
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£1024 a month
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i think he saves for 14610 days ,that includes the 10 x 29ths of February.
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Sorry I added 6 months, £1046
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if you save 1k a month at 3% it will take 42 years 3 months to hit a million
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i reckon he only has to save £20.24.per day ,but am i correct?
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https://www.thecalculatorsite.com/articles/finance/how-long-will-it-take-me-to-save.php
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https://www.thecalculatorsite.com/articles/finance/how-long-will-it-take-me-to-save.php |
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remember he gets 3% interest every year on the amount he has in the bank,so he will be getting interest on interest each year.
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much depends when he turned 25, if it was yesterday he has longer than if he turns 26 tomorrow
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i took a million and i subtracted 3% of it 40 times(number of years) ,then i divided it by 14610 (number of days) but i am not sure if that is the way to work it out.??????????????????????????
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alpha centuri has worked it out for you
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the answer to the way i worked it out gives £20.24 per day,what am i doing wrong,surely a guy would not get a million for 20 quid a day?
i am all confused ,if anyone can work it out please post your answer.thanks in advance,its not a trick question. |
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No Brass, you're way off, you have the answer.
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alpha says 1046 per month,i need to know how much per day,so alpha says about £35 per day,now that sounds more like it than my answer.
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By the time he's 66 a million won't be worth a million.
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A million in 40 years time is meaningless without knowing about interest rates and inflation.
If you assume they are the same rates, I reckon he would need to save about £70 a day to get to a million in real terms. £70*365*40= £1.02m |
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when i was at school i played golf with an ex footballer.
he was working out his retirement plan and looking at buying a paper shop, or a pub, or a milk round. he reckoned if he could get £40,000 he would be able to retire. probably similar to £1million in 40 years time, if inflation in meantime returned to levels of past 40-50 years |
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the question is ,if a guy is 25 years of age on the 31 st December 2019 (his birthday) and decides to save each day until he is 66,how much per day does he have to save to reach a million quid if his bank manager is giving him 3% interest every year on his savings.
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You've been told the approximate answer more than once and I've been even posted a link to an online calculator where you can play with the numbers yourself!
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so he is going to be saving for 41 years,and he gets 3% interest on the last day of every year,now there are 11 leap years,
so i reckon he will save for 14976 days,so if i take a million and take 3% off for 41 years that leaves £286840.91 that he has to save ,divided by 14976 means all he has to save is £19.15 per day. if i am correct ,and you are 25 years of age,and you know a bank manager that will give you 3% per year on your savings you can be a millionaire in 41 years time for £19.15 per day.but i have being known to get it wrong now and then.  |
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i have bad eyesight JC (no joking)and i can not read the link ,never mind punching it in,but if you say £35 per day i will take your word for it,thanks ,it was doing my head in trying to work it out.
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Rule of 72 - number of years to double your money is 72 / interest rate
or 72/3 = 24 years 40 years to retirement You start with x After 24 years (72/3) you have your first double, or 2x Then you start with 2x and you get 16/24 of a second double or 0.667 2x + 0.667*2x = 3.334x You want 1,000,000 You start with 1,000,000 / 3.334 You start with 299,940 |
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It would have been better if I read the question.
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The rule of 72 is really handy to know (there is another variation of it isn't there) but not appropriate, I thought of it myself yesterday :) Excel must have a formula for this?
There must be standard ways of doing it. Capital repayment mortgages for example, they are kind of exactly this in REVERSE. I wonder how they did that before computers if the maths isn't eay by hand. Lookup tables like logs perhaps? |
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THere's a discussion on doing it in excel (lengthy!) here:
https://www.ablebits.com/office-addins-blog/2015/01/21/compound-interest-formula-excel/ and here's another fancier calculator. https://www.bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx It can't be that difficult as I knocked this up in excel myself years ago, it's how I planned to be as fabously rich as I am now :) |
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brassneck; there`s a major flaw in the way you are calculating it; subtracting x% from y to leave z is NOT the same as adding x% to z so that you end up with y. Easy example; 20-50%=10, but 10+50%=15. Likewise, to go from 40 years to 41 years, you add 3%, but if you take 3% of 41 away from 41, you won`t end up back at exactly 40. Close, but such small differences add up over time, especially as we`re dealing with Compound Interest
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Could have been worded it a bit better;
`... to go from 40 years to 41 years, you add 3%, but if you take 3% of 41 away from 41, you won`t end up back at exactly 40...` Obviously meaning; add/subtract the 3% to/from the cash, not to/from the time period |
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Interest compounds.
As does inflation. |
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You can use the pmt or fv formulas in excel but I think you need to understand some subtle underlying principles for them.
Like it only seems to work well with annual interest paid monthly. Which sorts out your leap year problem because you aren’t getting daily compounded interest. Anyway it says.. =PMT(3%/12,41*12,0,-1,000,000) =1034.78 Proved by =FV(3%/12,41*12,-1034.78,0) =1,000,004.01 ..but a slightly different calculator might give a slightly different answer |