![]() ![]() ![]() It starts with your savings earning interest. But, this is exactly what happens to money over time. Ok, I will admit that this example is a little extreme. It’s incredible how a frivolous purchase early on in your savings journey will have a major impact on your long term financial goals! What an astounding difference between Sammy Saver and Brad Buyer, $4,152,360.96 to be exact! Mind blown. How does this play out over the long term? Keep plugging along to see what happens. At the end of the day, here is where each stands. On Day 8 Brad Buyer is feeling good and decides to reward himself with a 99₵ candy bar. Their wealth doubles each day for 30 days. Let’s assume there are two people, Sammy Saver and Brad Buyer, each starts with 1₵. Take a look at this example of compound interest at work. The result is interest on interest! A phenomenon happens every month for most accounts. And the following period, your new principal balance earns interest. The interest gets added to your principal balance. ![]() It is expressed as a percentage and is calculated based on the principal amount of money you have in deposits.Ĭompounding interest occurs when you start to receive interest payments. For most people, this would be at a bank or credit union. Interest is the amount of money that a financial institution pays you for keeping your money with them. I hate losing, so how do you profit from the power of compounding? But if you don’t, you will be hindered by it, pay for it, and ultimately lose money. By understanding the power of compounding you can use it to your advantage, earn, and win. Not according to Einstein, possibly the smartest man who ever lived.Įinstein makes a crucial point. And don’t these Wonders have something to do with reliving cultures of the ancient world? ![]()
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