Build wealth with compound interest
The old saying ‘time is money’ really is true. Compound interest is defined as interest on a loan or deposit calculated based on both the initial principal. (whatever money you have to start with), and the accumulated interest from previous periods. For example, if you put $10 in a savings account and the bank pays you 3% interest compounded weekly, after 1 week you have $10.30. The next week you get paid 3% of 10.30 so 31 cents and so on. You can see how this can add up over time.
How to use compound interest to your advantage:
- Put your current savings into a savings or fixed-term deposit account that pays interest compounded monthly.
- Shop around for the most competitive rate.
- Use this easy compound interest calculator to see how much you can make over time.
As per example, if you put $10,000 into a fixed-term deposit savings account paying 5% interest compounding monthly.
Every week you put your savings, $200 into the account. 5% doesn’t sound like much but compounded monthly, you’ll have $151,048 over 10 years including $37,048 in interest! The interest you have made is almost 4x your initial deposit. Time is money.