The Math of Financial Literacy

By: Engr. Edgar Caburatan Carrillo II, ChE

Master of Science in Mechanical Engineering

De La Salle University Manila, Philippines

Flow of Discussion

1.Brief Introduction2. Three wealth creation strategy3. Comparison and Analysis of Strategies4. Conclusion

Brief Introduction

Engr. Edgar Caburatan Carrillo II

3 Wealth Creation Strategy

1. Simple Interest

2. Compound Interest

3. EC Wealth Model

12

365

)1(

)1(

1

1

1

xSY

xDY

YiFVFV

FVFV

YiPVFV

ms

ss

snn

n

s

Simple Interest

P= Php 50,000i=10%n=40 years

FV= Pin + PFV= 50,000*.1*40 + 50,000FV= Php 250,000

Dividend: Php 5,000/yearMonthly: Php 416.67/month

Compound Interest

P= Php 50,000i=10%n=40 years

FV= P(1+i)^nFV= 50,000(1+.1)^40FV= Php 2.26 MDividend: 226,296.30Monthly: 18,858.02

EC Wealth Model

P= Php 50,000 Ds= P 3.33/dayI=10% Sm= 33.33x 30=1000n=40 years Ys= 1000*12= 12,000

FV1= P(1+i)+ YsFV1= 50,000(1+.1)+12,000= 67,000FV2= 67,000(1.1)+12,000=87,000Fvn= P 7.57 MDividend: 757,407.30/yearMonthly: 63,117.28/month

Analysis of Wealth Creation model

Inflation: Food= 50*3=150/day*30= 4,500Cost of Food each month in 2014= Php 4,500Cost of Food each month after 40 years:FV=PV(1+i)^n= 4,500(1+.05)^40= 31,679.95 1. Simple InterestPhp= 416.67 (You will not survive)2. Compound InterestPhp= 18,858.02(You will not survive)3. EC Wealth ModelPhp= 63,117.28(You will survive)

Conclusion

The three wealth Creation model can grow your wealth but among the three, EC Wealth Model was proven to be the most efficient way producing massive wealth.

The EC Wealth Model can only be implemented if Disciple, hardwork and consistent monthly savings will be done. This is to secure your retirement, securing your future and the future of your children's children.

Thank You For Listening and Start Saving Now!