I'm planning to save some money. I earn in Pakistani Rupees. At the time of posting 1Usd = Rs 123.12.

I came up with an idea to save a certain amount each month and add additional 10% of the saved amount.

So the formula become (total savings * 0.1) + total savings + this month contribution

enter image description here

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    The math seems correct. What exactly are you confused about? – Nosjack Sep 6 '18 at 20:23
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    Would the 10% come from you or the bank? – D Stanley Sep 6 '18 at 20:32
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    At 10%, the interest on the first 10,000 alone after 10 years is 24,553. Compound interest results can be astonishing at higher interest rates for longer periods. – D Stanley Sep 6 '18 at 20:36
  • @DStanley I'm panning to add 10% myself – Junaid Qadir Sep 6 '18 at 21:17
  • @Nosjack because the growth is insanely exponential. – Junaid Qadir Sep 6 '18 at 21:24

If you could earn 10% monthly interest on your savings, then this calculation might make sense. Assuming you almost certainly can't, you are proposing a plan in which the amount you save each month increases very rapidly. Why do you think you will be able to afford to contribute more than Rs 28,000 per month by a year from now, if you can't currently? That money has to come from somewhere.

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  • I'm not earning the 10% as such, just want to add it on my own on the saved amount the previous month. – Junaid Qadir Sep 7 '18 at 6:15
  • @JunaidQadirShekhanzai How? Where will you be getting ever increasing amounts of money from? – Robert Longson Sep 7 '18 at 6:29
  • RS.10,000 in today's USD is only 81.18. i'm earning enough to save $200+ each month. – Junaid Qadir Sep 7 '18 at 7:03

Yes, your math is correct. These two options basically show exponential and linear growth respectively. A 10% increase in deposits each month is very, very large.

If you expand your math out to 24 months and make a graph, the difference is very noticeable:

enter image description here

On month 24 you add nearly $80,000 on top of your base $10,000. And that additional amount keeps growing.

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