Do you like free money? We do too. So even though the topic of compound interest seems like a snooze fest, it’s important to you. You care because it’s the biggest advantage you have to jump from some money to a lot of money over time. We ask you, “Do you have something better to do than watch your money grow while you sleep?”
Let’s look at an easy example. You have 100 bucks and put it in a savings account at the bank at 3% interest. In a year you earn $3.00. Next year you’ll have $103 gaining interest. If it seems like this example is a dripping faucet that will never fill your cup, we want you to multiply your deposit by 10 ($1,000) and commit to adding about $100 a month to the pot. Believe us; many tubs have flooded over using this exact method. It just needs to be multiplied over time. Look at this awesome example we calculated at bankrate.com, and you’ll be hooked.
Convinced? Here are 10 facts you need to know about compound interest adapted from Gary Foreman, who founded TheDollarStretcher.com—a top finance website offering insight on how to live better for less.
- Anyone can do this. You do not need to be a financial genius; your money will multiply regardless of how smart you are (and we know you’re smart, because you’re leveraging compound interest).
- Beware the double-edged sword of compound interest. Banks obviously know about this magic trick and that’s why you can quickly get upside down in a car (you know we don’t mean that literally, right?)
- Time is on your side. The longer money compounds, the faster it grows. Money growing at 6 percent per year will double in about 12 years, but it will be worth four times as much in 24 years.
- Time is not on your side. Credit cards and other open-ended accounts use compound interest against you. That’s why “minimum payments” are likely to keep you in debt forever. Double your payment if you can to get that monkey off your back.
- You don’t have to be rich to make compound interest work for you. The magic works the same whether you invested $100 or $100 million. The millionaire may have more investment options, but everyone can use compound interest to create and enhance wealth.
- Sacrifice a little to get a lot. It’s true that you’ll need to do put aside a few dollars to keep the pot growing, but we guarantee that you’ll be glad you did.
What’s the bottom line? Compound interest i s the magic spell to covert pennies into dollars, and it makes a huge difference in your financial strategy.
What you can do
What if we told you we could get you a consistent interest rate much higher than the 3% mentioned in our example? We know a strategy using compound interest that has consistently proven itself for over a hundred years. It’s the method used by the wealthy, banks, and corporations to keep their money multiplying. It’s called the Perpetual Wealth Strategy that allows you to grow your wealth, access cash value, and leave a legacy for your family. The keystone to this strategy is found in a well-planned whole life insurance policy with a paid-up cash addition.
Let us tell you more about this strategy. Take a few minutes to learn about the Perpetual Wealth Strategy. It’s our mission to provide you with financial education. We invite you to take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!
Take advantage of this FREE resource by clicking below.
Q: What is compound interest and why is it significant?
A: Compound interest is the process where the interest earned on an investment is reinvested, earning further interest over time. It’s significant because it allows investments to grow exponentially, greatly increasing the potential return over a long period.
Q: How does compound interest differ from simple interest?
A: Compound interest differs from simple interest in that it is calculated on the initial principal and also on the accumulated interest of previous periods. This means that the investment grows at an increasing rate, unlike simple interest which is calculated only on the principal amount.
Q: What are some effective strategies to maximize the benefits of compound interest?
A: Effective strategies include starting to invest early to take advantage of time, regularly contributing to the investment, and choosing investments with higher interest rates. Reinvesting dividends and interest also helps to maximize the effects of compounding.