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For the benefit of this exercise we will suppose a regular saving of $5 per week deposited into a bank account and not withdrawn. Try for a "Bonus Savings Account" in which increased interest is paid for any month in which there are no withdrawls from the account.


We are rounding off the figures so assume some bank charges since we know that there are 52 weeks in a year.


We now have enough money to open a Cash Management Account at our own bank. If your bank doesn't have a Cash Management Account available then find one which does. Some Banks insist of a minimum deposit of $1,000.00, in which case you will reach this stage in Year Four.


$250.00 - in savings account
$500.00 - in cash management account
$ 25.00 - interest on funds in cash management account at 5% (remember that rounding)



$250.00 - in savings account
$775.00 - in cash management account
$ 39.75 - interest - say $40.00



$  250.00 - in savings account
$1,065.00 - in cash managemet account
$   53.00 - interest



Now we have enough money to keep the Cash management account open AND start to invest in stocks and shares. Chose a reputable Equity Trust which pools the money of its investors to buy shares in a wide range of companies. This is a cushion against a poor performance by one or two companies and is a VERY SAFE investment. If you can find one of these equity trusts which has a DIVIDEND RE-INVESTMENT PLAN* then go for it as it is a wonderful way to accumulate capital.

We are going to withdraw $1,000.00 from the Cash Management Fund and and invest it in an equity trust. this leaves:

$368.00 - in the Cash management Account
$250.00 - in the savings account
$ 68.00 - interest

$636.00 and $1,000.00 worth of shares


If your $5.00 per week had been left in a bank savings account you would now have $1,530.00, give or take a bit for minimal interest and bank charges.

However, if you compound your money you will now have $1,636.00.

And money DOES grow on trees - the more you have the greater the yield.

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*DIVIDEND RE-INVESTMENT PLAN is a great means of increasing your holding of shares in a company. Instead of taking the twice-yearly dividend in cash, the company pays you with more shares in the company, usually at a discounted price and with the certain saving since you pay no brokerage fees.

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