How Money Works - Compound Interest at Work


Have you often wondered how some people are able to get ahead financially and others seem to barely make ends meet? How do some people who may not make a lot of money, still seem to be able to live a comfortable life and save for the future while other people who may make a lot of money, always seem broke? After talking with many financially successful people, I discovered something they all have in common – they know the secret of how money works and how to make money work for them. Compound interest and the rule of 72 are two of these personal finance tools. Albert Einstein reportedly referred to compound interest as one of the most powerful forces in the universe. Compound interest is something that can work for you or can work against you. The real power of compound interest can be seen when you apply these principles to a personal financial plan for your future. Your personal finance kit will help you understand how to use these personal finance tools to make your money work for you. Click here to see how an average American family used this personal finance kit to learn how to make their money work for them and change their financial future.

Finding out more about how money works and the part it plays in your personal financial plan can provide answers to the following personal finance questions.

  • How can I make sure I will be able to reach my financial goals?
  • Will my current retirement plan give me a comfortable retirement?
  • How can I afford to send my children to college?
  • Can I wait to start saving until I start making more money?
  • Does the rate of return really make that much of a difference?
Let’s look at two examples to see if the rate of return of your investment really makes that much of a difference? The following chart shows the power of compound interest as you look at what happens to a $5,000 investment over the course of 30 years at different rates of return.
While after 10 years, the rate of return may not seem to have made much of a difference, after 30 years, the difference is phenomenal. After 30 years, your original $5,000 investment will grow to only $30,000 at a 6% rate of return while at a 12% rate of return your initial investment would have grown to about $180,000. Which would you rather have at retirement? The $30,000 or the $180,000? The rate of return makes a huge difference. The power of compound interest can help you attain all your financial goals more easily than you may think.
Here is another example that shows the power of compound interest. How would you like to turn $33,500 into $4 million? Start an IRA for your child when he or she is born. A $500 contribution every year (less than $50 per month) for 67 years (a total contribution of $33,500) at a 10% rate of return will give you child about $4 million at retirement! Waiting until your child is 21 to start saving will reduce this value at retirement to $500,000!

Knowing how money works and the power of compound interest is essential in creating a financial plan for your future and making sure that your investments will meet your future needs. Will you current retirement savings plan be enough? Will you be able to help contribute towards your children’s education? With the middle-class crunch becoming more and more real, it is so important that you be able to answer these question as well as other personal finance questions you may have. The power of compound interest can help you make sure you meet your goals.

Is saving for your future a priority? Waiting will cost you more than you think. A financial plan and the power of compound interest will show you that the longer you wait to start saving, the more you will have to save each month to reach your goals. Are you ready to create a financial plan to give you the personal finance tools to get you and your family on the proper road to financial success? Are you ready to take the first step toward understanding compound interest and developing a financial plan to secure your families future? If you are ready to make your future a priority, this easy-to-use personal finance kit will help you do just that. Take the first step and learn more about how the power of compound interest and a personal financial plan can help make your money work for you. You can’t afford to wait.





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