MMS #4 | The magic of compounding returns, explained

10/15/23 • 15 min

In this episode of Money Made Simple, Jennie and Liv explain how compounding returns (including compound interest) work, and why compounding is such an important financial concept to understand. So magical, in fact, that Albert Einstein called it the "eighth wonder of the world". Go figure!
This episode covers:

A simple explanation of how compounding returns work
An example of how compounding can work in terms of interest on your bank balance vs investment returns
How compounding can work against you, via interest on debt
Why time in the market (aka get saving, earlier!) is such a good way to take advantage of compounding returns

Resources we mention in this episode:
- sorted.org.nz
- simplicity.kiwi
- moneyhub.co.nz
We hope you can walk (or dance) away from this episode with the knowledge and confidence to get compounding returns working for you, and minimise the impacts of compounding debt that work against you.

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Disclaimer: This podcast contains personal opinions and is intended to provide educational information only. It doesn't relate to your particular financial situation or goals and is not financial advice or recommendations. Simplicity New Zealand Limited is the issuer of the Simplicity KiwiSaver scheme and investment funds. For product disclosure statements please visit Simplicity's website simplicity. kiwi.

A simple explanation of how compounding returns work
An example of how compounding can work in terms of interest on your bank balance vs investment returns
How compounding can work against you, via interest on debt
Why time in the market (aka get saving, earlier!) is such a good way to take advantage of compounding returns

Previous Episode

MMS #3 | Net worth: why the heck is it important and how do I get rich?

In this episode of Money Made Simple, we talk about how to get rich. And no, we're not promoting some get-rich-quick scheme, we're talking about building sustainable wealth over the long-term. Spoiler alert: It's all about changing the way you think about money and your finances. AKA focusing on your net worth vs. money in the bank.
This episode covers:

What we mean by net worth
How to calculate your own net worth (it's easier than you think!)
How thinking in this way can make you happier - and richer
The rule of 4% for financial independence
Practical steps you can take to increase your net worth

One of our favourite resources sorted.org.nz, has a handy and simple-to-use net worth calculator:
https://sorted.org.nz/tools/net-worth-calculator
Our aim for this episode is to leave you with a better understanding around long-term wealth. You'll walk away knowing how to calculate your personal net worth, armed with practical ways in which you can start to increase it for a better financial future.

Next Episode

MMS #5 | Simplicity Living: What's build-to-rent got to do with Simplicity?

In this episode of Money Made Simple, Liv is joined by founder and managing director of Simplicity Sam Stubbs to explain exactly how Simplicity Living (the build-to-rent company which Simplicity funds own) works. Sam, who is also on the board of Simplicity Living, provides a useful overview of exactly how the investments work, and importantly why he thinks this type of investment will be SO good for our members in terms of long-term returns.
This episode covers:

How Sam came to start Simplicity (as well as Simplicity Living and the other investments that make us unique)
A brief, behind-the-scenes simple explainer on how Simplicity funds invest in Simplicity Living
How Simplicity Living makes profits and how these flow through to Simplicity members
Sam's view on the competitive advantages that these investments bring
If, why and how we've moved away from 100% "passive investing" - and our plans for the future around this
The ambitions around Simplicity Living and the impact it could have for the NZ housing market

Our aim for this episode is to arm you with a much better understanding of the nuts and bolts around how and why we've decided to invest via Simplicity Living. We hope that by listening, you'll get a good idea of the impacts on you as a member - and the social good that we're trying to achieve as a secondary objective!