Newspaper article The Northern Star (Lismore, Australia)

Compounding Interest Builds Wealth

Newspaper article The Northern Star (Lismore, Australia)

Compounding Interest Builds Wealth

Article excerpt

TO BUILD wealth you must understand the power of compounding.

It's simple - when you let the earnings on an investment compound, you leave them to grow instead of withdrawing them.

Suppose you placed $100,000 in the bank earning 3%.

After a year you would have accumulated $3000 in interest which you could withdraw or leave in the account.

If you leave it in the account, you now have $103,000 working for you - this is called compounding.

Provided the interest rate stayed the same, you would earn $3090 in interest in the following year and your account balance would be $106,090.

If that was left to compound, the interest the next year would be $3183 and your new balance $109,273.

In just three years, your money has grown by over 9%.

Notice how both the interest and the principal are growing each year because every year you've got more money working for you.

What has always fascinated me about compound interest is that it works in ways that seem totally illogical. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.