The Cost of Waiting

Many people hesitate when it comes to investments or savings, hoping and waiting for the best deal.

What they don't realise is that by waiting, there's a cost involved too - The Cost of Waiting

Imagine one day you see a Fix Deposit (or investment) advertisement, giving an interest rate of 3% every year. The plan is to start from Year 2005 to Year 2010. By putting $50,000 with the financial institution for 5 years, you will get $57,963.70 at the end of the term. You can earn a total interest of $7,963.70 if you invest now.

But something is pulling you back, you are wondering is there any better opportunities or higher interest rates. You decide to wait.

1 year later ...

Indeed, there's a higher interest rate being offered this time -

3.2% interest rate!

And this offer is sweeten even further, only 4 years required. You decided to take up the offer. It's year 2006 now.

Four years later. Year 2010 ...

Your $50,000 became $56,713.81. Total interest earned is $6,713.81.

Cost of Waiting?

$7,963.70 - $6,713.81 = $1,249.89

Given a fixed time frame (until year 2010), the cost of waiting is $1,249.89

What are you waiting for? :)

PS: To obtain the same amount of interest (i.e. $7,963.70), an interest rate of 3.764% per annum is required.