Explaining compound interest

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"The most powerful force in the universe is compound interest." - Albert Einstein

Basically, it's the your original money can make interest. If the interest rate is high enough and the money sits for a long enough time, pretty soon the interest you made can make interest. And this is the power of compound interest.

Look at this way... let's say that you save $1000 and put it away right away. Let's say that (to make things simple), that $1000 earns 10% every single year... here is how much you would have after a certain amount of year:

Start - $1,000
Year 5 - $1,464
Year 10 - $2,357
Year 20 - $6,115
Year 30 - $15,863
Year 40 - $41,144

So you can see the great power of compound interest. In the first 20 years of that investment, you would earn about $5000, which is nice but its not as good as it could be. However, during the next 20 years the money gains about $35,000. This is just for a one-time $1000 investment.

So this is the power of compound interest... let it work for you, and it can do wonders. Remember, the longer the time period, the more compound interest can kick in, and the better off you'll be.