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Picture: 123RF/UUK ZIVANA
Picture: 123RF/UUK ZIVANA

The article by Esther Mukumbo “Can you budget your way out of poverty?(Your Money, May 5-May 11) refers. While it’s probably a good idea to save money for short-term goals, unfortunately her figures conveniently forget one vital aspect: net present value. 

Telling us we’ll turn a R100 a month investment at 8% interest into R18,128 in 10 years’ time is fine in 2032’s money. Unfortunately, in today’s rands (which we should be comparing it with) it’s a lot less.

At an annual inflation rate of, say, 5%, the value in today’s terms is only about R11,000. Considering you’d have put in (fair enough, in devalued rands) the grand total of R12,000 (10 years x 12 months x R100) to get to that figure seems a bit of a waste to me. 

Maybe your R100 a month should rather be spent on a better investment? Like an accounting course to start off with, to understand why banks and insurance companies are so willing to take your money, effectively under false pretences. 

Dave Stephens
Scarborough

The FM welcomes concise letters from readers. They can be sent to fmmail@fm.co.za

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