Interest
Lookout
Take interest in your interest – and on it, too.
Suppose you have $100 in a savings account earning
3% interest. If the account pays simple
interest and you don't add or subtract any money,
you'll earn 3% on your deposit each year, or $3. After
25 years, you'll have a balance of $175 ($100 + (25
x $3) = $175).
But with compound interest your account will grow faster,
because your interest starts earning interest, too.
You would earn $3 the first year. But then, the second
year you would earn $3.09, or 3% of your $103 balance.
And after 25 years of compound interest, you'd
have a $209 balance!
Just remember that if you add money to your account,
your balance might grow a lot more. And, if you withdraw,
or take money out, it might grow much less. When you
add or take away from your account, you're changing
the amount you can earn as well. And when you're
building a mountain of savings, every cent counts.
