The Power of Compound Interest: How to turn $10 into $100 While You Sleep | Millennial Money

In this video I discuss the Power of Compound Interest. Compound Interest is the interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. This means not only does the amount of money you put into your savings or investment account grow over time, based on the Interest Rate or Annual Rate of Return you receive, but the gain that you will receive will also grow along with your originally deposited money.

One way to determine how long it will take your money to double, is by using the Rule of 72. With the Rule of 72, you would divide the interest rate or rate of return you expect to receive into 72, and the number you receive is the approximate amount of years it will take to double. If you have a 2% return (Best Savings Accounts available currently) it would take 36 years to double.

However, if you have an 8% return, it would only take about 9 years. Based on the average return of the S&P 500, which is over 8% average for the past 90 years, you could double your money approximately every decade.

Here are a few great quotes about Compound Interest:

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. — Albert Einstein

My wealth has come from a combination of living in America, some lucky genes, and compound interest. — Warren Buffett

Time is your friend, impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market. — Warren Buffett

What are you waiting for? Get your savings into a higher interest rate account, and preferably invest in the stock market to help your money grow faster!

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