Compound interest is when the money you earn starts earning money.
Compounding is the easiest way to become wealthy.
The sooner you begin investing, the more time your earnings
have to compound.
Compound interest is an investor’s best friend. Compounding
is simply when the money you earn starts earning money. This means your stash
is growing faster than if you were simply adding a lump sum every month.
So many people say “I can’t afford to start investing.” The
truth is, you can’t afford not to start investing, because time is the issue
here, not money. Compound interest is the real silver bullet when it comes to
growing your wealth and the earlier you start, the more powerful it becomes.
A certificate of deposit (CD) or a government bond over time
might give you 5% per year. A 10% annual return is the historical average for
the stock market. And 15% is what you could get if you learn how to pick your
own stocks and take advantage of the skills MyWallSt teaches.
The majority of people subscribe to some form of online
entertainment service like Spotify Premium or Netflix – a lot subscribe to
both. The $18 leaves our bank accounts every month and we hardly even
notice.
Let’s say at 18 years old, you subscribe to both services
and remain a loyal customer for the next 50 years. You’ll end up retiring
$10,800 down. “Small price to pay for being able to binge watch Breaking Bad,”
I hear you say.
Had you stuck that $18 into a savings account
instead you’d have that $10,800 when it comes to retiring, plus some interest.
Of course, inflation will have eaten up a huge chunk of that, so it’s hardly
worth giving up the comfort and convenience of your subscription accounts.
Had you invested that money, after year one, on average,
you’re up 10% on your original investment. The year after, you make interest on
your interest and so on. It’s like adding successive layers to a cake with each
a little larger than the last. So if you’d consistently invested that money,
after 50 years it would be worth over $300,000.
Still think you can’t afford to start?