Hey folks!!! How about a good news this weekend? This is something related to your financial life. Do you want a better way to maximize your money and savings? Well, it has all something to do with compound interest, the surest way and easiest key to a more successful financial life. Read on folks…
Let’s begin, what is a compound interest? Well, it is referred to as one of the most fundamental investment tools but it is often misunderstood or taken for granted by people who are trying to get the most out of their income and other ways of earning.
Compound interest is a topic which usually arouses interest and nods in the business arena. Unfortunately, many people are not paying attention to the benefits and how this really works; thus a lot suffers from the depths of bankruptcy because of credit card debts and other related problems. Unmistakably, banks and other financial institutions are enjoying so much and making the most out of this money-making scheme to the detriment and disadvantage of those borrowers and other debtors.
Do you know how compound interest works?
Simply put,a compound interest is an interest that comes on top of the regular savings interest plus the original principal sum over a particular period of investment. To explain this fully, let’s take this example:Assume you have $10000 now in your savings and you are supposed to have an interest of 3% annually with your principal sum. This money of yours would become $10300 by the end of the year!In the second year, your original, principal savings which is now $10300 will eventually become, by the end of that year, a whopping $10609. What a great increase!!! In the third year,your accumulated sum of money would add up and become, hold your breath, $10927 and so forth. What a fantastic way of making your money work for you. This is basically the secret of a compound interest. In the same manner, your very own savings of$10000 if compounded on a basis of 10% per annual would have generated times two or double with the computation we discussed a while ago. Therefore, you just can’t imagine how much will you earn from compound interest in 10 years, 15 years or more!!! Therefore when you will be told by your banks that they will make your money work harder for you, they are in fact just employing the principle of compound interest.
While it’s nice to think that your money in the bank increases and is making you richer, it also expected that you won’t be making withdrawals every now and then because this dramatically reduces the effect and impact of compound interest. In short, never try to attempt getting something from your savings if you want to really maximize its compound interest.
Conclusively, compound interest works more efficiently for you if it continues to happen more frequently. Which is to say in other words, twice yearly is far more effective than yearly and quarterly is certainly much okay than twice yearly and so forth. Hence, the ideal investment plans must possess the following features:
- Returns of at least 5%
- Compounding is on a monthly basis
- There is a low risk with a higher winning percentage (no less than 90%)
- Flexible in withdrawal for liquidity (i.e. you can stop anytime)
So what are you waiting for, let’s begin using or employing compound interest and be on your way to a more financially free and happier life! Have a great weekend.