{"id":24348,"date":"2022-05-30T14:23:02","date_gmt":"2022-05-30T14:23:02","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?post_type=markets&#038;p=24348"},"modified":"2026-10-15T14:38:49","modified_gmt":"2026-10-15T09:08:49","slug":"personal-finance-math","status":"publish","type":"markets","link":"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-math\/","title":{"rendered":"Personal Finance Math"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"24348\" class=\"elementor elementor-24348\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-0ac7e7a elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\" data-id=\"0ac7e7a\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column 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data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\">\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery(\"#post_chapters a[href*='\" + location.pathname + \"']\")\n\t\t\t\t.addClass(\"current\")\n\t\t\t\t.attr(\"aria-current\", \"page\");\n\t\t})\n\t<\/script>\n\t<div class=\"desktop_chapters\"><div id=\"post_chapters\"><div class=\"post_chapters-heading\">Chapters<\/div><ul><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/introduction-to-mutual-funds\/\">Background and Orientation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-math\/\">Personal Finance Math<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/money-today-vs-money-tommorrow\/\">Money Today vs Money Tommorrow<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-retirement-part-1\/\">The Retirement -Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/assumptions-in-retirement-planning\/\">Assumptions in Retirement Planning<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-stock-funds\/\">The Role of Mutual Funds in Modern Finance<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/concept-of-fund-and-nav\/\">Concept of Fund and NAV<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-the-performance-of-your-fund\/\">Mutual Fund Factsheet<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-equity-scheme\/\"> The Equity Scheme<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/know-your-fund-manager\/\">Equity Scheme Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-1\/\">Debt Funds Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/monitoring-your-portfolio\/\">Debt Funds Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-myths\/\">Debt Funds Part 3<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-4\/\">Debt Funds Part 4<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/investing-in-bonds\/\">Investing in Bonds<\/a><\/li><\/ul><\/div><\/div><div class=\"chapters_toggle\"><a href=\"#\" id=\"open_chapters\" aria-label=\"View chapters\"><span>View Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><a href=\"#\" id=\"close_chapters\" style=\"display:none;\" aria-label=\"Hide chapters\"><span>Hide Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><\/div>\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery('.chapters_toggle 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class=\"elementor-element elementor-element-709dc22 market_content_tabs elementor-widget elementor-widget-eael-adv-tabs\" data-id=\"709dc22\" data-element_type=\"widget\" data-widget_type=\"eael-adv-tabs.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t        <div data-scroll-on-click=\"no\" data-scroll-speed=\"300\" id=\"eael-advance-tabs-709dc22\" class=\"eael-advance-tabs eael-tabs-horizontal eael-tab-auto-active \" data-tabid=\"709dc22\">\n            <div class=\"eael-tabs-nav \">\n                <ul class=\"eael-tab-inline-icon\" role=\"tablist\">\n                                            <li id=\"study\" class=\"active-default eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"true\" data-tab=\"1\" role=\"tab\" tabindex=\"0\" aria-controls=\"study-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-edit\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Study<\/span>                            \n                                                    <\/li>\n                                            <li id=\"slides\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"2\" role=\"tab\" tabindex=\"-1\" aria-controls=\"slides-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"fas fa-book-open\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Slides<\/span>                            \n                                                    <\/li>\n                                            <li id=\"videos\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"3\" role=\"tab\" tabindex=\"-1\" aria-controls=\"videos-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-eye\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Videos<\/span>                            \n                                                    <\/li>\n                    \n                                  <\/ul>\n            <\/div>\n            \n            <div class=\"eael-tabs-content\">\n\t\t        \n                    <div id=\"study-tab\" class=\"clearfix eael-tab-content-item active-default\" data-title-link=\"study-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Simple-Interest' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.1 <\/strong><strong><b>Simple Interest<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-77783 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest.png\" alt=\"Simple Interest\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Simple-Interest-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Understanding the mathematics behind money is the foundation of personal finance. Without grasping how interest, returns, and compounding work, it\u2019s impossible to make informed decisions about savings, loans, or investments. This chapter explores simple and compound interest, how returns are measured, the compounding effect, the time value of money, SIPs, inflation, and debt, concepts that form the backbone of wealth creation.<\/p>\r\n<p>Simple interest is the basic way to calculate interest. Simple interest is charged on the original principal amount and it does not take into account any interest that has already been earned before.<\/p>\r\n<p><strong>Example: Lending to a Friend<\/strong><\/p>\r\n<p>Suppose you lend your friend \u20b91,00,000 for 5 years at an interest rate of 10%.<\/p>\r\n<ul>\r\n<li>Principal (P): \u20b91,00,000<\/li>\r\n<li>Rate (R): 10% per year<\/li>\r\n<li>Time (T): 5 years<\/li>\r\n<\/ul>\r\n<p>The formula, for interest is:<\/p>\r\n<p>Interest=\u00a0P\u22c5R\u22c5T<\/p>\r\n<p>=1,00,000\u22c510%\u22c55=\u00a0\u20b950,000<\/p>\r\n<p>So at the end of 5 years you earn \u20b950,000 as simple interest. Your friend repays \u20b91,50,000 in \u20b91,00,000 principal + \u20b950,000 simple interest).<\/p>\r\n<p><strong><b>Yearly Breakdown<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Principal Outstanding<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Interest Earned<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Total Value<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>1<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,00,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,10,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>2<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,00,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,20,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>3<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,00,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,30,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>4<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,00,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,40,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>5<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,00,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,50,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>Notice that the interest is <strong><b>constant every year<\/b><\/strong>\u00a0because it is always calculated on the original principal.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='Compound-Interest' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h3 style=\"text-align: left\"><strong>2.2 <\/strong><strong><b>Compound Interest<\/b><\/strong><\/h3>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-77784 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest.png\" alt=\"Compound Interest\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compound-Interest-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<p>Compound interest is more powerful because it calculates interest not only on the principal but also on the accumulated interest. Compounding is often called the \u201c8th wonder of the world\u201d\u2014a line popularly attributed to Albert Einstein, although there is no evidence that he ever said it.<\/p>\r\n<p><strong><b>Formula for Compound Interest<\/b><\/strong><\/p>\r\n<p><strong>A = P * (1+r)<sup>t<\/sup><\/strong><\/p>\r\n<p>Where:<\/p>\r\n<ul>\r\n<li>= Final amount<\/li>\r\n<li>= Principal<\/li>\r\n<li>= Interest rate per period<\/li>\r\n<li>= Number of periods<\/li>\r\n<\/ul>\r\n<p><strong><b>Example: Same Loan, Compounded Annually<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Principal (P):<\/b><\/strong>\u20b91,00,000<\/li>\r\n<li><b><\/b><strong><b>Rate (R):<\/b><\/strong>10%<\/li>\r\n<li><b><\/b><strong><b>Time (T):<\/b><\/strong>5 years<\/li>\r\n<\/ul>\r\n<p>A =1,00,000 * (1+0.10)<sup>5 <\/sup>=1,00,000 *1.61051<strong><b>\u00a0= <\/b><\/strong>\u00a01,61,051<\/p>\r\n<p>Here, the total interest earned is \u20b961,051\u2014significantly higher than the \u20b950,000 from simple interest.<\/p>\r\n<p><strong><b>Yearly Breakdown<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Amount at Year End<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Interest Earned That Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Total Interest Accumulated<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>1<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,10,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>2<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,21,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b911,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b921,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>3<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,33,100<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b912,100<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b933,100<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>4<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,46,410<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b913,310<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b946,410<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>5<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,61,051<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b914,641<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b961,051<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>Notice how the interest grows each year because it is calculated on the <strong><b>new balance<\/b><\/strong>.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Compounded-Returns' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.3<span style=\"color: #f1566d\">. <\/span><\/strong><strong><b>Compounded Returns<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-77785 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns.png\" alt=\"Compounded Returns\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounded-Returns-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>When you invest money, the concept of <strong><b>returns<\/b><\/strong>\u00a0mirrors interest. If you borrow, you pay interest; if you invest, you earn returns. Returns can be measured in two ways:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Absolute Return<\/b><\/strong>\u2013 Used when the investment horizon is less than one year.<\/li>\r\n<li><b><\/b><strong><b>Compound Annual Growth Rate (CAGR)<\/b><\/strong>\u2013 Used when the horizon is one year or more.<\/li>\r\n<\/ol>\r\n<p><strong><b>Example: Absolute Return<\/b><\/strong><\/p>\r\n<p>You invest \u20b91,00,000 on 1st Jan 2019 and withdraw it on 1st Jul 2019 (six months later) with a gain of \u20b910,000.<\/p>\r\n<p>Absolute Return = Gain\/Principal\u00a0<\/p>\r\n<p>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 = 10000\/1.00,000\u00a0<\/p>\r\n<p>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0= 10%\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0<\/p>\r\n<p><strong><b>Example: CAGR<\/b><\/strong><\/p>\r\n<p>You invest \u20b91,00,000 and withdraw \u20b91,33,100 after 3 years.<\/p>\r\n<p>CAGR =(1,33,100\/1,00,000) <sup>1\/3 <\/sup>-1 = 10%<\/p>\r\n<p>CAGR smooths out the growth rate over multiple years, making it easier to compare investments.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='The-Compounding-Effect' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.4. <\/strong><strong><b>The Compounding Effect<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77786 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect.png\" alt=\"The Compounding Effect\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/The-Compounding-Effect-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Compounding is the reinvestment of earnings. Instead of withdrawing profits, you let them remain invested, so they generate additional returns.<\/p>\r\n<p><strong><b>Example: \u20b9100 at 20% Growth<\/b><\/strong><\/p>\r\n<ul>\r\n<li>End of Year 1: \u20b9100 \u2192 \u20b9120<\/li>\r\n<li>End of Year 2: \u20b9120 \u2192 \u20b9144<\/li>\r\n<li>End of Year 3: \u20b9144 \u2192 \u20b9172.80<\/li>\r\n<\/ul>\r\n<p>If you had withdrawn \u20b920 profit each year, you would have only \u20b9160 (\u20b9100 principal + \u20b960 profit). By reinvesting, you end up with \u20b9172.80\u2014an extra \u20b912.80 simply by staying invested.<\/p>\r\n<p><strong><b>Long-Term Growth<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Value (20% CAGR, rounded to nearest \u20b9)<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>1<\/b><\/strong><\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>\u20b9120<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>2<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9144<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>3<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9173<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>4<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9207<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>5<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9249<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>6<\/b><\/strong><\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>\u20b9298<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">\r\n<p><strong><b>7<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9358<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">\r\n<p><strong><b>8<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9430<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\"><strong><b>9<\/b><\/strong><\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>\u20b9516<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">\r\n<p><strong><b>10<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b9619<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>This table shows how wealth accelerates over time. The longer you stay invested, the more powerful compounding becomes.<\/p>\r\n<p><strong><b>Key Differences: Simple vs Compound Interest<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Feature<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Simple Interest<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Compound Interest<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Basis<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Only on principal<\/p>\r\n<\/td>\r\n<td>\r\n<p>On principal + accumulated interest<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Growth<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Linear<\/p>\r\n<\/td>\r\n<td>\r\n<p>Exponential<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Formula<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>P *R * T<\/p>\r\n<\/td>\r\n<td>\r\n<p>P*(1+R)<sup>T<\/sup><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Example (\u20b91,00,000, 10%, 5 yrs)<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b950,000 interest<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b961,051 interest<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Why Compounding Matters in Personal Finance<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Savings Accounts<\/b><\/strong>\u2013 Banks use compound interest to grow deposits.<\/li>\r\n<li><b><\/b><strong><b>Fixed Deposits<\/b><\/strong>\u2013 Cumulative FDs usually compound interest quarterly and pay it out at maturity.<\/li>\r\n<li><b><\/b><strong><b>Mutual Funds<\/b><\/strong>\u2013 In the growth option, gains stay invested in the fund and are reflected in its NAV, creating compounding.<\/li>\r\n<li><b><\/b><strong><b>Stocks<\/b><\/strong>\u2013 Companies that reinvest their profits can grow earnings year after year, so share prices can compound over time even if you do not reinvest dividends.<\/li>\r\n<li><b><\/b><strong><b>Retirement Planning<\/b><\/strong>\u2013 The earlier you start, the more powerful compounding becomes.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Time-Value-of-Money' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.5. <\/strong><strong><b>Time Value of Money (TVM)<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77787 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money.png\" alt=\"Time Value of Money\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Time-Value-of-Money-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>The time value of money\u00a0means that money you have today is worth more than the same amount in the future. The <em><i>timing<\/i><\/em>\u00a0of money matters, not just the amount.<\/p>\r\n<p><strong><b>A simple story.<\/b><\/strong>\u00a0Your uncle offers you a choice:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Option A: <\/b><\/strong>\u20b91,000 today<\/li>\r\n<li><b><\/b><strong><b>Option B: <\/b><\/strong>\u20b91,000 one year from today<\/li>\r\n<\/ul>\r\n<p>Most people pick Option A, and they are right. If you take \u20b91,000 today and put it in a bank fixed deposit at 7% interest, you will have \u20b91,070 after one year. Option B gives you only \u20b91,000 after the same year.<\/p>\r\n<p>So \u20b91,000 today is really worth \u20b91,070 a year from now. That extra \u20b970 is the &#8220;time value&#8221; of your money.<\/p>\r\n<h2><strong><b>Why is money today worth more?<\/b><\/strong><\/h2>\r\n<p>There are three simple reasons.<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>It can grow : <\/b><\/strong>Money today can be invested in a bank deposit, mutual fund or shares. It earns interest or returns, so it becomes more money later.<\/li>\r\n<li><b><\/b><strong><b>Prices go up :\u00a0 <\/b><\/strong>A samosa that costs \u20b920 today may cost \u20b930 in a few years. The same \u20b9100 buys less in the future.<\/li>\r\n<li><b><\/b><strong><b>The future is uncertain : <\/b><\/strong>A promise to pay later may not be kept. Money in your hand today is certain.<\/li>\r\n<\/ol>\r\n<p><strong><b>Remember:<\/b><\/strong>\u00a0When comparing two amounts of money, always ask <em><i>how much<\/i><\/em>\u00a0and <em><i>when<\/i><\/em>.<\/p>\r\n<h2><strong><b>Future Value (FV): moving money forward<\/b><\/strong><\/h2>\r\n<p><strong><b>Future Value<\/b><\/strong> : &#8220;If I invest money today, how much will it become later?&#8221;<\/p>\r\n<p>FV = PV *\u00a0(1 + R)<sup>t<\/sup><\/p>\r\n<p>Where:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>PV<\/b><\/strong>= Present Value, the money you invest today<\/li>\r\n<li><b><\/b><strong><b>R<\/b><\/strong>= rate of return per year, written as a decimal (10% = 0.10)<\/li>\r\n<li><b><\/b><strong><b>T<\/b><\/strong>= number of years<\/li>\r\n<\/ul>\r\n<p>The small T above the bracket is a power. It means you multiply by (1 + R) once for every year. This is called compounding: you earn returns on your money <em><i>and<\/i><\/em>\u00a0on the returns you already earned.<\/p>\r\n<p><strong><b>Worked example.<\/b><\/strong>\u00a0Riya invests \u20b910,000 at 10% per year for 3 years.<\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Calculation<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Value at end of year<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p style=\"text-align: center\">1<\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>10,000 \u00d7 1.10<\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>\u20b911,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>2<\/p>\r\n<\/td>\r\n<td>\r\n<p>11,000 \u00d7 1.10<\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b912,100<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">\r\n<p>3<\/p>\r\n<\/td>\r\n<td style=\"text-align: center\">\r\n<p>12,100 \u00d7 1.10<\/p>\r\n<\/td>\r\n<td>\r\n<p style=\"text-align: center\">\u20b913,310<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>Using the formula directly: FV = 10,000 \u00d7 (1.10)\u00b3 = 10,000 \u00d7 1.331 = \u20b913,310.<\/p>\r\n<p>Notice that Riya earned \u20b91,000 in Year 1 but \u20b91,210 in Year 3. Her interest grew because she was earning interest on her interest.<\/p>\r\n<h2><strong><b>Present Value (PV): moving money backward<\/b><\/strong><\/h2>\r\n<p><strong><b>Present Value<\/b><\/strong>\u00a0answers the opposite question: &#8220;I need a certain amount in the future. How much should I invest today?&#8221;<\/p>\r\n<p>PV =FV\/(1+R)<sup>t<\/sup><\/p>\r\n<p>Here we divide\u00a0instead of multiply. This is called discounting. Think of it as compounding played in reverse.<\/p>\r\n<p>Worked example.\u00a0Aman wants \u20b950,000 after 2 years to buy a laptop. His bank pays 8% per year. How much should he deposit today?<\/p>\r\n<ul>\r\n<li>Step 1: (1 + 0.08)\u00b2 = 1.08 \u00d7 1.08 = 1.1664<\/li>\r\n<li>Step 2: PV = 50,000 \u00f7 1.1664 = \u20b942,867\u00a0<\/li>\r\n<\/ul>\r\n<p>So if Aman deposits about \u20b942,867 today, it will grow to \u20b950,000 in 2 years.<\/p>\r\n<p>Easy way to remember:\u00a0FV goes forward\u00a0and multiplies. PV goes backward\u00a0and divides.<\/p>\r\n<h2><strong><b>Real-life example: planning for retirement<\/b><\/strong><\/h2>\r\n<p><strong><b>Goal:<\/b><\/strong> You want \u20b91 crore\u00a0 after 20 years. You expect your investment to grow at 12% per year. How much must you invest today as a one-time amount?<\/p>\r\n<ul>\r\n<li>Step 1: (1.12)\u00b2\u2070 \u2248 9.646<\/li>\r\n<li>Step 2: PV = 1,00,00,000 \u00f7 9.646 \u2248 <strong><b>\u20b910,37,000<\/b><\/strong><\/li>\r\n<\/ul>\r\n<p>So investing about \u20b910.37 lakh today, growing at 12% a year, becomes \u20b91 crore in 20 years. Here is how it grows:<\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Point in time<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Value of investment<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Growth in the previous 5 years<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Today<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910.37 lakh<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u2014<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>After 5 years<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b918.28 lakh<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b97.91 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>After 10 years<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b932.21 lakh<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b913.93 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>After 15 years<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b956.76 lakh<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b924.55 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>After 20 years<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91 crore<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b943.24 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>What to notice:<\/b><\/strong>\u00a0The money grows slowly at first and very fast at the end. More than 40% of the final amount is added in the last 5 years alone. This is the power of compounding, and it only works if you give it time.<\/p>\r\n<h2><strong><b>Four key lessons<\/b><\/strong><\/h2>\r\n<ol>\r\n<li><strong><b> Start early.<\/b><\/strong>Waiting makes your goal much more expensive. To reach \u20b91 crore at 12%:<\/li>\r\n<\/ol>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>When you start<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Years left<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Amount to invest today<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Today<\/p>\r\n<\/td>\r\n<td>\r\n<p>20<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910.37 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>5 years later<\/p>\r\n<\/td>\r\n<td>\r\n<p>15<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b918.27 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>10 years later<\/p>\r\n<\/td>\r\n<td>\r\n<p>10<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b932.20 lakh<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>A 5-year delay almost doubles the money you need.<\/p>\r\n<ol start=\"2\">\r\n<li><strong><b> The rate of return matters : <\/b><\/strong>At 8% instead of 12%, you would need about \u20b921.45 lakh today to reach \u20b91 crore in 20 years. A small difference in rate makes a big difference over many years.<\/li>\r\n<li><strong><b> Inflation shrinks future money :<\/b><\/strong>If prices rise about 6% a year, \u20b91 crore after 20 years will buy only what about \u20b931 lakh buys today. You can check this with the PV formula: 1 crore \u00f7 (1.06)\u00b2\u2070 \u2248 \u20b931.18 lakh.<\/li>\r\n<li><strong><b> The Rule of 72 : <\/b><\/strong>Divide 72 by the yearly return to find roughly how many years it takes to double your money. At 12%, 72 \u00f7 12 = <strong><b>6 years<\/b><\/strong>. At 8%, 72 \u00f7 8 = <strong><b>9 years<\/b><\/strong>.<\/li>\r\n<\/ol>\r\n<h2><strong><b>Key terms<\/b><\/strong><\/h2>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Term<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Simple meaning<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Time value of money<\/p>\r\n<\/td>\r\n<td>\r\n<p>Money today is worth more than the same money in the future<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Present Value (PV)<\/p>\r\n<\/td>\r\n<td>\r\n<p>What a future amount is worth today<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Future Value (FV)<\/p>\r\n<\/td>\r\n<td>\r\n<p>What today&#8217;s money will grow into later<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Compounding<\/p>\r\n<\/td>\r\n<td>\r\n<p>Earning returns on your earlier returns; moves money forward<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Discounting<\/p>\r\n<\/td>\r\n<td>\r\n<p>Reverse of compounding; moves future money back to today<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Rate of return (R)<\/p>\r\n<\/td>\r\n<td>\r\n<p>The yearly percentage your money grows by<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Inflation<\/p>\r\n<\/td>\r\n<td>\r\n<p>The rise in prices over time, which reduces what money can buy<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>CAGR<\/p>\r\n<\/td>\r\n<td>\r\n<p>Compound Annual Growth Rate: the steady yearly rate that explains total growth<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Rule-of-72' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.6 <\/strong><strong><b>Rule of 72<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77788 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72.png\" alt=\"Rule of 72\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Rule-of-72-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<p>The <strong><b>Rule of 72<\/b><\/strong>\u00a0is a shortcut to estimate how long it takes for money to double at a given interest rate.<\/p>\r\n<p>Doubling Time \u2248\u00a072\/R<\/p>\r\n<ul>\r\n<li>At 6% \u2192 12 years<\/li>\r\n<li>At 12% \u2192 6 years<\/li>\r\n<li>At 18% \u2192 4 years<\/li>\r\n<\/ul>\r\n<p>Here R is entered as a percentage (for 12%, use 12, not 0.12). The rule is an approximation\u2014at 18%, for example, the exact doubling time is about 4.2 years\u2014but it helps investors quickly gauge the power of compounding.<\/p>\r\n<p>Suppose you invest \u20b91,00,000\u00a0in a fund that earns 8% per year, compounded annually.<\/p>\r\n<p><strong><b>Using the Rule of 72:<\/b><\/strong><br \/>Doubling time \u2248 72 \u00f7 8 = <strong><b>9 years<\/b><\/strong><\/p>\r\n<p>So in about 9 years, your \u20b91,00,000 should grow to roughly \u20b92,00,000.<\/p>\r\n<p><strong><b>Checking with the exact formula:<\/b><\/strong><br \/>\u20b91,00,000 \u00d7 (1.08)\u2079 = \u20b91,99,900<\/p>\r\n<p>That\u2019s almost exactly double, so the rule works very well at this rate.<\/p>\r\n<h3>Example: Multiple doublings<\/h3>\r\n<p>You invest \u20b91,00,000 at <strong><b>12%<\/b><\/strong>\u00a0for <strong><b>18 years<\/b><\/strong>.<\/p>\r\n<ul>\r\n<li>Doubling time \u2248 72 \u00f7 12 = 6 years<\/li>\r\n<li>18 years \u00f7 6 = 3 doublings<\/li>\r\n<li>\u20b91 lakh \u2192 \u20b92 lakh \u2192 \u20b94 lakh \u2192 \u20b98 lakh<\/li>\r\n<\/ul>\r\n<p>The exact value is \u20b91,00,000 \u00d7 (1.12)\u00b9\u2078 \u2248 \u20b97.69 lakh, so the rule gets you close.<\/p>\r\n<h3>Example: Working backwards<\/h3>\r\n<p>You want your money to double in <strong><b>5 years<\/b><\/strong>. What return do you need?<\/p>\r\n<p>Required rate \u2248 72 \u00f7 5 = 14.4% per year<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='SIPs-and-Lump-Sum-Investing' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.7 <\/strong><strong><b>SIPs and Lump Sum Investing<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77789 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing.png\" alt=\"SIP and Lump Sum Investing\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/SIP-and-Lump-Sum-Investing-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Mutual fund investors often use <strong><b>Systematic Investment Plans (SIPs)<\/b><\/strong>, where a fixed amount is invested every month. SIPs harness compounding and rupee-cost averaging.<\/p>\r\n<p><strong><b>Case Study: SIP vs Lump Sum<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Investment Style<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Monthly\/Initial Investment<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Duration<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>CAGR<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Final Corpus<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Lump Sum<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b924,00,000 upfront<\/p>\r\n<\/td>\r\n<td>\r\n<p>20 yrs<\/p>\r\n<\/td>\r\n<td>\r\n<p>12%<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b92,31,51,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>SIP<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b910,000 per month (\u20b924 lakh in total)<\/p>\r\n<\/td>\r\n<td>\r\n<p>20 yrs<\/p>\r\n<\/td>\r\n<td>\r\n<p>12%<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b991,99,000<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>Both investors put in the same \u20b924 lakh and earn the same 12% CAGR. In this example, with a steady 12% return every year, the lump sum ends far higher because the whole amount compounds for the full 20 years, while each SIP instalment compounds for a shorter period. In real markets returns are not steady, and the SIP\u2019s strengths lie elsewhere: it suits people who earn monthly and do not have a large sum to invest, and it reduces timing risk by spreading purchases across market highs and lows.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide08' class='sa_hover_container' data-hash='Compounding-in-Equity-Markets' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>2.8 <\/strong><strong><b>Compounding in Equity Markets<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77790 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets.png\" alt=\"Compounding in Equity Markets\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Compounding-in-Equity-Markets-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Unlike FDs, stock market returns are volatile. Yet, compounding works through <strong><b>price appreciation<\/b><\/strong>\u00a0and <strong><b>dividend reinvestment<\/b><\/strong>.<\/p>\r\n<p><strong><b>Example: Long-Term Equity Growth<\/b><\/strong><\/p>\r\n<p>\u20b91 lakh invested in the Nifty 50 at the end of 2003 (index level 1,879.75) grew to about \u20b911.6 lakh by the end of 2023 (index level 21,731.40), despite crashes in 2008 and 2020. That is a CAGR of about 13% from price gains alone, before counting dividends. Staying invested allowed compounding to work despite volatility.<\/p>\r\n<p><strong><b>Key Takeaways<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Simple interest<\/b><\/strong>is linear and easy to calculate but less rewarding.<\/li>\r\n<li><b><\/b><strong><b>Compound interest<\/b><\/strong>grows exponentially, making it far more powerful.<\/li>\r\n<li><b><\/b><strong><b>Absolute return<\/b><\/strong>measures growth over periods shorter than one year, while <strong><b>CAGR<\/b><\/strong>\u00a0measures annualized growth over one year or more.<\/li>\r\n<li><b><\/b><strong><b>Compounding effect<\/b><\/strong>shows how reinvested profits accelerate wealth creation.<\/li>\r\n<li>Time is the most critical factor\u2014compounding rewards patience and discipline.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tjQuery('.text_slider_goto8').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 7);\n\t\t});\n\t\tvar resize_22661 = jQuery('.owl-carousel');\n\t\tresize_22661.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p>                    <\/div>\n\t\t        \n                    <div id=\"slides-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"slides-tab\">\n\t\t\t\t        <p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2021\/10\/coming-soon-person-g8026473a8_1920-removebg-preview.png\" \/><\/p>                    <\/div>\n\t\t        \n                    <div id=\"videos-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"videos-tab\">\n\t\t\t\t        <p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2021\/10\/coming-soon-person-g8026473a8_1920-removebg-preview.png\" \/><\/p>                    <\/div>\n\t\t                    <\/div>\n        <\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Study Slides Videos 2.1 Financial Plans \u00c2 Akansha and Abhijeet, both in their 20s, recently married and excited about planning their life together, heard about a free financial-planning seminar taking place at the local hotel. 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