The magic of compound interest.
NASFUND members should take advantage of the benefit of compound interest while contributing towards their retirement savings.
 |
| Source: NASFUND Facebook | 23rd March 2019 |
Chief finance officer, Rajeev Sharma said that, the benefit of compound interest can be seen when NASFUND member does not withdraw funds for the long term. Compound interest will further grow member's balance if the member increases an additional amount from the normal mandated contributions of the member or employer contributions.
In an example of a member who has contributed for 30 years.
The illustration below shows the benefit of increasing one’s contribution through voluntary contribution of K50 and K150 with an assumed average return of interest of 5% for the period of 30 years.
Additional Contribution (K)
10yrs 20yrs 30yrs
K50 K7736 K20, 339 K40, 866
K150 K23,207 K61,007 K122,579
A member who increases an additional contribution of K50 for the next 30 years will have a total additional balance of K40,866, out of which he would have contributed only K 18,000 and balance of Kina 22,866 would come from interest.
However, if the NASFUND member increase an additional of K150 for the next 30 years, the member will have K122, 579 as his total balance.
“This is the magic of compound interest”, he said.
“This will happen if the member does not touch the funds while still contributing and the savings will grow through interest that is being credited by the FUND annually”.
NASFUND has paid K1.4 billion as crediting amount to it’s members in the last six years.
