Accumulating Capital Details

The gradual process of gathering all your finances in one place, as with a savings account, without taking away from it is what we refer to as accumulating. Accumulation doesn't necessarily have to be money. It might also involve assets that have a monetary value. Some terms you can associate with accumulating include amassing, collecting, and assembling.

Without the concept of accumulating, there wouldn't be terms such as net worth because it solely depends on the funds you saved over time. If you're discussing accumulating outside of the basic savings account, it refers to a period when people are making contributions to their annuity or paying premiums. Accumulating capital, therefore, is simply saving up your funds, contributing money, increasing finances or other assets, and letting it grow on its own from interest or by personal contributions.

Banks are a key tool when it comes to the accumulation of funds since they are the ones that allow you to open accounts in which you can save your money. Saving is a form of accumulation since you let your funds build-up without subtracting from what you already have. These bank accounts may be savings accounts or trust funds that are locked.

Example of Accumulating Capital

Let's say you are an aspiring entrepreneur on the road to your multi-million dollars. You'll need to find the means to acquire the capital and resources you need to reach your goals. You will deposit the capital you receive into a high-interest savings account. You also have a Roth IRA from your current job and are making the max yearly contributions. Between the two accounts, you expect to accumulate a lot over a couple of years.

Time passes, and the total in your savings account and Roth IRA is starting to build— you are meeting your expectations. This entire time, you haven't withdrawn a penny. After a few years into continuous saving and discipline of not spending your savings, you have saved up your goal amount. You request a bank loan that adds to your capital, and your dream of starting up your business is finally possible. We can say that over the years, you accumulated your wealth to the amount you dreamed of.

History of Accumulating Capital

Accumulating capital is a concept that goes way back even before the invention of currency when our predecessors gathered food, firewood, and supplies during fall in preparation for winter. This allowed them to easily acquire food from their food shelters during winter when it snowed and food was hard to find, or goods to trade with others for the things they needed.

This would allow them not to starve just because they accumulated adequate food to sustain them through the winter season. It wasn't until the 1700s in Europe that savings banks were established, and people could start storing their money.