Compound Interest Power
Today i am going to show you the greatest gift of all natures : The power of compounding interest and how you can harnest its power fully in your wealth building journey. The power of compound interest is best harnested the younger you start saving and putting money aside.
So how does the power of compounding interest works. It works by setting a certain amount of money aside for a certain period of time. Compound interest is the interest earned on the reinvested interest, in addition to the original amount that you save.
For instance, you are 20 years old today and started putting $10,000 in an investment account for 35 years and left it there until you reach the retirement age of 55. The interest rate for this investment account is 10% p.a and compounded every year. Hence, when you reach your retirement age, the initial amount of $10,000 would have balloned to $309,126.81. An amount increase of more than 3000% !!! However, if you only put that $10,000 when you are 30 years old, the amount would become $119,181.77 when you reach the age of 55. A significant difference of $189,945.01 for that 10 years you started saving late. You can click here for steps and formula of calculating compounding interest in Excel.
This shows the power of compound interest. Harnest it young and you are on your way to becoming wealthy. Actually ,there is another way to harness the great power of compounding interest which i will explain to you more in my next post. See Also Guide To Reduce Credit Card Debt Labels: The Power Of Compound Interest |
