What is compound interest?
It is the interest you get on the money you initially invest and the interest you earn on the interest you’ve already earned.
The power of compounding interest helps you save more money. The longer you save the more interest you earn. This means earning more interest on the interest you are earning.
For example, if Sally invests an initial deposit of $1,000 and it compounds at 5%, after one year Sally would make $50 and the investment becomes $1,050.
In another year her investment is $1,102 and after 5 years $1,276, 10 years $1,628, 25 years $3,386 and 50 years $11,467.
This is not a get rich quick scheme but if you stick with it and contribute regularly your investment will grow.
The best way to take advantage of this is to start early and contribute regularly.
