Compound Interest – the most powerful force in the universe

Teaching Financial Literacy is one of my favorite things to do. GoBankingRates.com asked me to be a part of their Financial Literacy Tag video series so I had to say “Yes”.

They wanted an inspiring story or example of how learning about financial literacy changed my life. I don’t really have a great story but I did want to share my thoughts about what a brilliant man once said:

Compound Interest is the most powerful force of the universe

Month #1: Put $100 into an account

$100.00 earning 12% annually (about 1% a month) earns $1.00

($100 x 1% = $1.00, turning $100.00 into $101.00)

Month #2: Let it grow again

Leave the $101.00 to grow another 1% = $1.01 in growth

($101.00 x 1% = $1.01, turning last month’s balance into $102.01)

The dollar that grew last month grew another penny this month.

Add another $100.00 to the first month’s account and it grows another $1.00 as well

(First month’s continued growth balance $102.01 + this month’s $101.00 = $203.01)

Month #3: Do it again

The balance from month #2 grows another 1%, add another $100.00 to it

($203.01 x 1% = $2.03, new total $205.04). Add $100.00 again ($100.00 x 1% = $101.00). The total at the end of Month #3 = $306.04

Month #4 and more: Compound your account over time

After 10 years you would have put $12,000 into the account = $23,233.91

After 20 years your account would grow to be $99,914.79

In 40 years you would have put $48,000 into the account but have over $1,000,000!

That’s amazing! That’s Compound Interest

You can’t get 12% in the market (blah blah blah)

While many people believe you can’t get 12% in the market, I have absolute proof that this magical formula can save you more than that every year – EVEN IN A BAD ECONOMY!

Watch the video to learn how