The Secret of Compound Interest

If you ever wondered why the rich get richer always causes may surprise you. He often comes to two things.

1st They spend less than ea

2nd They earn interest on interest (compound interest)

The first reason is fairly obvious. If they spend less than they earn, they will always have more money. Hence, they will always be richer. The second reason is more or less turbo-charges the first reason. Say, for example, you have $ 10,000 in an investment account. If this account is an interest rate of 10% after one year, then you will have $ 11,000. If you do not spend all that money, after two years can expect $ 12,000 in interest to be applied. However, you actually end up with $ 12,100. This is because you have interest on interest. T. Y. 10% of the shares were actually applied to the $ 11,000. This is an example of compound interest. Now I bet you're thinking, so what. I only earned $ 100 more tha
I expected. "And this is true, but you need to consider the long-term effects of that additional money is put. The table below shows what happens, this $ 10,000 if it were invested in various lengths at 10% interest rate.

* 10 years = $ 25,937
* 25 years = $ 108,347
* 50 years = $ 1,173,909
* 100 years = $ 137,806,123

As you can see the money increase spread over a given period of time. But realistically, you are unlikely to invest their money for 50 or 100 years, unless you are particularly fond of your offspring. However, if you were spending less than you receive, and you have also invested say $ 500 per month on top of that $ 10,000 off the original investment, your money would grow as well.

* 10 years = $ 126,742
* 25 years = $ 730,393
* 50 years = $ 8,535,637
* 100 years = $ 1,009,366,604

You read that correctly. After 50 years you would have over eight millio
U.S. dollars, and after 100 years you would have more than one billion dollars! It's not a joke. Mathematics is precise. What's even more amazing is a huge impact on a few small changes can have such a result might be. If you are using a 12% interest rate, compared with 10% interest rate in the example above, your money would grow as follows:

* After 10 years = $ 143,195 - which is 13% higher than before ($ 126.742)
After 25 years * = $ 1,022,004 - it in more than 40% before ($ 730.393)
* After 50 years = $ 18,226,138 - a 114% higher than before ($ 8,535,637)
* After 100 years = $ 5,282,730,057 - a 423% higher than before ($ 1,009,366,604)

I bet you're now thinking, "I would have been rich, so I can take advantage of it." The good news is you do not have to be rich to use compound interest. You can get out of it, by investing any amount you feel comfortable.