'Compound interest is the eighth wonder of the world,' Einstein reportedly said. 'He who understands it, earns it. He who doesn’t, pays it.' (via Grow_mag)
You've heard the phrase "a penny saved is a penny earned." But what is a penny compounded? A whole lot more than you might think.is said to have called "the most powerful force in the universe."
"Compound interest is the eighth wonder of the world," Einstein reportedly said. "He who understands it, earns it. He who doesn't, pays it."is the interest you earn on your money, plus the interest it's already accrued. For example, if you deposit $100 in a savings account with a 5% interest rate, after one year, you'll have $105. If that interest compounds, in year two, you'll earn 5% on the $105, not just the initial deposit of $100.
So, after two years, your savings account would contain $110.25, and after three years, $115.76. With time and regular contributions, the compounding process can help you grow your wealth considerably.To illustrate how powerful compounding can be, imagine that you're starting out with a single cent, and that it doubles every day.
Let's start at the beginning. After two days, you'd have $0.02. After three days, you'd have $0.04, and so on. At the end of a week, seven days later, your single cent would have compounded into $0.64. And after a month, or 30 days, you'd have over $5,300,000. That's the power of compounding.
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