The Power Of Compound Interest

Knowing the power of compound interest will make you want to save all the money you can. It’s the beauty of paying yourself with free money as if you had a second job. It can add up fast and reward you with financial security and a nest egg to boot.

If you start putting away $200 a month today with a 6 percent yield you’ll end up having $32,775.87 with interest in 10 years. That may seem like a long time, but trust me… once you’re working in the real world 2019 will be here in no time.

If the power in the stock market does a little better over the next 10 years, and you end up with an 8 percent yield you’ll have $36,589.21. This is after contributing $24,000.00 (which seems like a lot, but it’s only $200 a month).

10 years later, let’s say you stop contributing to the fund and just let that 32k compound at 6 percent interest for another 10 years, and you’ll have $59,632.31. It almost doubles by letting the money work for you. If you can get an 8 percent yield, you’re looking at $72,750.64.

Let’s look at it from another perspective. If you simply put away $200 bucks a month for 20 years at 6 percent you’ll have $92,408.18 in 2029. The same time frame of 20 years at 8 percent yield and you’re looking at $117,804.08.

Once again, let’s say you save for 10 years and have that $32,775.87 saved up (and 6 percent yield is a very conservative figure)… you stop putting in $200 a month, let it sit for 20 years at 6 percent, and that 32k will be a healthy $108,494.83. Bump that up to 8 percent over the 20 years and you’ve got $161,480.25. That 2 percent difference over the source of 20 years ends up being more than $50,000.00!

Finally, imagine you’re able to put away that $200 per month for 30 years in a row. At 6 percent interest, you’ll be staring at $200,903.01 in your bank account. Don’t tell me that you’re not a little excited.

If you can get a powerful 8 percent annual return, then watch out…$298,071.89! You should now realize the importance of compound interest and how your money can work for you. Look at the difference between a 6 and 8 percent yield… almost $100,000.00 by the time you’re ready to retire.