Is Compound Interest the Eighth Wonder of the World?

According to Albert Einstein – Yes it is!

What is compound interest?

The effect of compound interest occurs when money is earning money over time. It starts out small but before you know it, it becomes quite significant. The beauty of it is that it works continuously, even while you sleep!

Want an example?

Tom and his brother Joe both decide they want to invest for their eventual retirement at the age of 65. Tom invests $5,000 per year for 10 years starting at age 45 then stops for 10 years. Joe starts investing the same $5,000 for 10 years at age 55.

Assuming a 5% annual rate of return; Tom ends up with over $107,000 at 65, while Joe ends up with only $66,000! How is this possible if they both invested the same amount of money ($50,000)? The answer is – Compound interest!

Tom’s money continued to grow for 10 years after he stopped investing and waited for his retirement. If Joe wants to end up with the same amount of money, he needs to invest over $8,100 per year…!

Starting early is a good idea when it comes to insurance as well. When you start young, your premiums will be lower due to your age and your health condition, which is likely to be better at a younger age.

So start early, even if you start small… you will probably be better off this way than starting late or not starting at all!

At Bridge to Prosperity, we are passionate about helping people better manage their finances. Utilizing our extensive accounting and financial background, we are able to develop a clear plan based on your current financial situation and your short and long term goals.

Email us or call 778-776-4334 to find out how we can help you!