There is a lot of talk about compound interest in the world of personal finance. It is a double-edged sword that can be your worst enemy – exponentially increasing the amount of debt you owe – or your very best friend, steadily growing the size of your savings or retirement account. But do you know how it works?
In terms of savings, compound interest is the idea that your money will grow over time and that small amounts saved now can grow to much larger amounts in the future. The earlier you begin saving, the longer you have your money in the account and the more beneficial it can be for you! Check out this video from BetterMoneyHabits.com to see the math behind the term and learn about how compound interest can make your money grow faster.
And don’t forget to check out our nifty infographic on the Miracle of Compound Interest!