• Few financial ideas are as effective—or underappreciated—at generating wealth as compound interest.

• Compound interest, sometimes referred to as “interest on interest,” has the power to gradually increase modest, regular savings into significant

Compound interest:

What is it?
In a nutshell, compound interest is the interest you receive on both your initial investment, or main, and the interest you have already earned. This leads to exponential growth over time as your money begins to generate additional income on its own.

This is how it operates:

• Only the initial principle is subject to interest accrued by simple interest.

• Interest is paid on both the initial principal and any accrued interest when compound interest is used.

A Basic Illustration

After two years, interest is paid on both the first $1,000 and the full $1,050.

• And so it goes on. The growth quickens with time.

• Imagine this process being repeated for decades, not just a few years.

1. That is how compound interest works.
Your money rises tenfold the longer you keep it invested. Contributions made regularly in your 20s, even if they are modest, can surpass those made later in life.

2. Promotes Saving for the Long Run
   Knowing that the value of your investments will rise over time might significantly help you stick to your savings plan.
3. Fits Any Budget
   You don’t need to be wealthy to take advantage of compound interest. Even small, regular deposits can grow significantly over time, especially in tax-advantaged plans like IRAs and 401(k)s.

• Promotes Saving for the Long Run
  Knowing that the value of your investments will rise over time will help you stick to your savings plan. It highlights how crucial patience and consistency are.
• Fits Any Budget
  You don’t need to be wealthy to take advantage of compound interest. Even small, regular deposits can grow significantly over time, especially in tax-advantaged plans like IRAs and 401(k)s.

Concluding remarks

• Compound interest is a life strategy, not just a financial idea. It honors patience, consistency, and discipline.

• Knowing how to use compound interest can significantly enhance your financial future,

• Therefore, don’t wait for the “ideal moment” to begin saving.

• Yesterday was the best time. Now is the second-best time.