As far as personal investments go, compound interest is your best friend – interest on top of accrued interest. Instead of simply earning interest, on the initial principle you invest, you also earn interest on the interest that accrues over time. It makes your money grow faster than simple interest. Over time you make money on your original deposit plus the accumulated interest from the previous investment. It’s a powerful savings tool and can be your best friend in the financial planning realm.
On a small scale, if you invest $1,000 at a 5% annual interest rate compounded for 3 years you would earn $157 – a 15% increase. That’s compound interest.
On a larger scale, if you invested $10,000 at the same time as above, you would earn $1,570 dollars then you would have a total of $11,570 dollars.
On an even larger scale, invest $50,000 at the same rate and you would make $7,877 dollars in interest. That’s a 15.75 % growth rate.
Interest on top of interest equals a wise savings plan and money in your pocket – or in the financial institution of your choice. Either way, it’s a good investment. Growth on top of growth means a larger return and bigger savings.
Suggested Reading List
- Rich Dad Poor Dad by Robert T. Kiyosaki
- The Millionaire Next Door, by Thomas Stanley and Willian Danko
- The Total Money Makeover by Dave Ramsay
- I will Teach You to Be Rich by Ramit Sethi
- Think and Grow Rich by Napoleon Hill
- The Psychology of Money by Morgan Housel
- Mistakes That Made Me a Millionaire by Kim Perell
