Stephen Lart, dental Specialist Financial Adviser at Wesleyan Financial Services, breaks down financial jargon and shares the secret to growing wealth, whether it’s for yourself or your practice…
As a dentist, you understand the value of long-term planning — from building patient relationships to maintaining a thriving practice.
But when it comes to growing your wealth via saving and investing either with your personal income or practice profits, one of the most powerful tools at your disposal is something that works quietly in the background, steadily building value over time – compound interest.
Seeing as it’s Easter time, you can think of compound interest like starting with a simple egg.
At first, it seems insignificant — just a small beginning. But instead of using it immediately, you choose to nurture it. You keep it safe and allow it time to grow. Eventually, that egg hatches into a goose — and not just any goose, but one that begins laying eggs of its own.
Here’s where the magic happens: instead of taking those eggs and spending them, you let the goose sit on them. Over time, those eggs hatch into more geese. Suddenly, you don’t just have one goose — you’ve got a growing flock. And each new goose starts laying its own eggs. Soon, you’re no longer just collecting eggs — you’ve built yourself a golden goose empire.
How compound interest works its magic
Compound interest works the same way. When you invest money, you earn returns — that’s your first egg. Instead of spending those returns, you reinvest them. Over time, your investment starts generating its own returns, and those returns create even more returns. The longer you let the process continue, the faster your wealth grows because you’re not just earning on your original investment — you’re earning on the returns from previous years.
As an example, if you invest £10,000 and achieved a medium growth rate of 5% annual return, after one year, you’ll have £10,500. If you leave it alone, the next year you’re not just earning 5% on your original £10,000 — you’re also earning 5% on the £500 you gained last year. After 10 years, that £10,000 could grow to over £16,000 without you adding a single extra penny. After 20 years, it could grow to over £26,000 — more than double your original investment.
The sooner you start, the bigger the flock
The longer you let your investment grow, the more powerful the compounding effect becomes — like a growing farm of geese, each laying golden eggs year after year.
As a dentist, your earning potential is strong. That’s why it’s crucial to make your money work for you, even when you’re not working. Compound interest allows you to grow your wealth passively. Instead of relying solely on the income from your practice, you can build a secondary stream of income that works in the background. The sooner you start, the more time you give your golden goose to grow.
Starting early makes a huge difference. The earlier you start, the more time you give your investments to compound. Even small amounts invested early can grow significantly over time. Consistency is key. Regular contributions to your investment portfolio help accelerate growth – think of it as adding more eggs to the nest.
Reinvesting your returns is where the magic really happens. Avoid the temptation to cash out early if it’s not necessary. Let your returns stay in the pot so they can generate their own returns.
Choose your baskets wisely
When it comes to where’s best to grow your savings, it’s good to understand the pros and cons for both savings and investments.
While savings accounts provide a sense of security, they carry the risk of inflation slowly eroding your money’s purchasing power over time. On the other hand, investing offers the potential for higher returns, but comes with market fluctuations and uncertainty that can impact your capital. Balancing these risks is essential to safeguarding your wealth while pursuing growth.
Diversifying your portfolio helps reduce risk — just like you wouldn’t put all your eggs in one basket, spreading your investments across different asset classes helps to protect you from market ups and downs.
Seeking professional advice can make a big difference. A specialist financial adviser who understands the unique financial landscape for dentists can help you develop a tailored investment strategy to suit your personal circumstances and attitude to risk, helping to maximise your returns.
Build your golden goose empire
As a dentist, you’ve spent years building your practice and perfecting your craft. Now it’s time to let compound interest do some of the heavy lifting. Start with that first egg — a small investment. Give it time, reinvest the returns, and watch as it hatches into a golden goose that keeps laying eggs long into the future.
After all, why rely solely on your hands to create wealth when you can let tailored advice, time and compound interest work their magic?
Please note: The value of investments may go up and down and you may get back less than you invest. Speak to a dental Specialist Financial Adviser at Wesleyan Financial Services to start building a nest egg. Book here or call 0808 149 9416.
Charges may apply. You will not be charged until you have agreed to the services you require and the associated costs. Learn more at www.wesleyan.co.uk/charges.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.
Practice Plan Limited (Registered in England and Wales No. 03089948) is a part of the Wesleyan Group. Registered office: Cambrian Works, Gobowen Road, Oswestry, Shropshire, SY11 1HS Telephone number: 01691 684120. Website: www.practiceplan.co.uk. Practice Plan Limited is an introducer appointed representative of Wesleyan Financial Services Limited.
