**With annuities, you invest a little at a time. We invested a total of $1200.**

**Let's compare this to a one-time investment like the one's we did in the last section:**

**If we make a one-time investment of $1200 at 12% compounded monthly, how much will we have at the end of one year?**

** Remember the formula:**

**initial amount = $1200**

** At the end of each period (every month), we'll be earning 1%... So, each $1.00 will turn into $1.01...**

**growth factor = $1.01**

**number of periods = 12 **

**Hey, we made more money! Isn't it better to invest a little at a time?**

**The reason we made more money is that the $1200 went in at the BEGINNING of the year. So, the balance was higher the whole year.**

**BIGGER BALANCE = MORE INTEREST**

**But, the realistic question is: Would you HAVE the whole $1200 at the beginning of the year? If the answer is "yes," then invest the whole thing. If the answer is "no," then do it a little at a time. This is usually easier for most people.**

If the amount you want to invest is realisticfor you (like only $100 a month as opposed to a chunk of $1200), then you are far more likely to invest it! |

**By the way, the term "annuity" is used when something pays YOU a little each month, too. It works both ways. (But, be careful because some people use the word "annuity" as a cloak for bad insurance investments! You can read more about this on Finance FREAK.)**