Final answer:
To determine how much to deposit into savings from a $1500 paycheck, if following financial advisors' advice to save 15%, you would deposit $225 into your savings account.
Step-by-step explanation:
If you made $1500 last month and want to put part of your paycheck into savings, the exact amount would depend on the specific portion you're seeking to save. However, as per financial advisors' recommendations, it's advised to "Pay yourself first!" by saving 15 percent for your retirement and saving whenever you receive money from a paycheck or other sources. Assuming you follow this guideline, 15% of $1500 is $225.
Depositing funds into a savings account early in your career utilizes the power of compound interest, which can significantly increase your savings over time. For example, saving $3,000 at a 7% annual rate of return for 40 years can yield nearly fifteen times the initial investment due to compound interest.
Another method for saving is through a certificate of deposit (CD), where a specific amount is deposited for a set time, usually at a higher interest rate than regular savings accounts. Although there is a substantial penalty for early withdrawal, this might be a suitable option if you can leave the money untouched for the duration of the CD's term.