Never underestimate the power of compound interest
because it is the rock on which your future wealth is built.
The sooner you begin, the more likely your plan will succeed.
Compounding occurs when the earnings on savings or investments are added back to the principal, or reinvested, which in turn generates additional earnings which are again invested, and so forth. This is such a basic process that it’s hard to see where the excitement is. And yet, compound interest can get the blood pumping when you realize the potential in smart investing.
because it is the rock on which your future wealth is built.
The sooner you begin, the more likely your plan will succeed.
Compounding occurs when the earnings on savings or investments are added back to the principal, or reinvested, which in turn generates additional earnings which are again invested, and so forth. This is such a basic process that it’s hard to see where the excitement is. And yet, compound interest can get the blood pumping when you realize the potential in smart investing.
Consider starting at the age of 21 by saving $2,000 per year each year. Though sound investment, you get a reasonable 8% interest on the principal. At age 30, you decide to stop and you leave your money growing at 8% until you retire at age 65.
Now assume you decided only to start saving at 30, but now you diligently save $2,000 every year until 65, again investing 8%.
Of course you reckon that having saved so much harder for so much longer, 35 years rather than just 10 years, you will have more than made up for lost time when you were young.
Now assume you decided only to start saving at 30, but now you diligently save $2,000 every year until 65, again investing 8%.
Of course you reckon that having saved so much harder for so much longer, 35 years rather than just 10 years, you will have more than made up for lost time when you were young.
Well, the 10 year plan, in which you invested $20,000, will reap $428,378!
The 35 year plan, in which you have invested $70,000, will reap considerably less: $344,634.
Hence, the magic of compound interest.
Use compound interest to boost the value of your investment.
Work hard to improve the percentage return and stick with it.
Not letting compound interest reward you later years is such a waste of all the effort put in the first few years when nothing much seems to be happening. So, let's start investing now.
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