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Compound Interest Really is The 8th Wonder of the World

Compound interest can be described as the interest you earn on interest, and can be a great way to build your savings. Essentially, when you deposit money into your savings account, compound interest means that you will earn interest not only on the initial amount you deposit, but also the interest that will accumulate over time.

Compound interest can also be applied both assets and liabilities. This includes savings and checking accounts, 401k, credit cards, loans, mortgages, and more.

In regard to savings and investments, however, there are key factors to keep in mind:

  • Compound interest will be based on how much money you initially deposit into an account.
  • The interest rate is what you earn per year.
  • Interest can be compounded daily, monthly, or annually.
  • The longer amount of time you allow money to stay in an account, the more interest you will incur.
  • The number of times you deposit and/or withdraw money from the account will also affect the interest and the rate it can grow.

Choosing to deposit even a small amount of money into a savings account and allowing it to stay there uninterrupted for a long period of time can result in an effortless increase of funds due to the accumulation of compound interest.

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