Posted by: George Christopher | July 17, 2009

The Amazing Secret of Compounding

Piggy.Bank 

The Amazing Secret of Compounding

Compounding can work for you or against you. When you borrow money, compounding works against you and takes more of your money, sometimes far more than the amount you initially borrowed. When you save and invest money, compounding works for you, paying you more money every day. 

You can become very wealthy. Compound interest grows gigantically faster than simple interest. The younger you are, the more you can use this "secret" to your advantage. Start now compounding interest and watch how fast your investments will grow. 

When comparing simple and compounding interest, imagine a duck and a jet, both ready to fly. The duck takes off slowly, staying close to the ground while gradually picking up height. The jet speeds down the runway, starts climbing rapidly, eventually climbing so high and so fast it appears to be going straight up. The jet is like compounding interest.  

Time is Magic 

"Compound interest is the greatest mathematical discovery of all time," said Dr. Albert Einstein. The results are determined by time, not just how much you invest!  Time really is magic.  

The Rule of 72 developed by Dr. Albert Einstein is an easy way to estimate how long it will take for your money to double with annual compounding. (Divide 72 by the percentage growth rate.) For example, with a 15% return your money doubles every 4.8 years. Round it to five years (for simplicity’s sake). This means a $5,000 one-time investment made at birth by parents and grandparents would grow to $2,560,000 when the child is 45 years old. This awesome result is based on two major factors-compounding earned interest and time. 

Remember that Wealth is a Matter of Choice-Yours Alone. Choose today to become a millionaire, to focus on your wealth creation, to create a life you love for you and your loved ones. 

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