Everything Everywhere Daily Compound Interest
Oct 19, 2024
Discover the transformative power of compound interest and how it can either build wealth or lead to debt. Learn about its impact on personal finances and national debt, illustrating how quickly credit card debt can spiral out of control. With an eye-opening example, see how just one cent invested at 1% interest can grow over time, revealing the staggering effects of compounding on economic growth and wealth disparity. Dive into the principles that separate compound interest from simple interest and its historical significance.
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Power of Compound Interest
- Compound interest is interest calculated on both the principal and accumulated interest, leading to faster growth than simple interest.
- This causes earnings to increase each period because interest is earned on previously earned interest.
Compound Interest Real Examples
- A 20-year-old investing $10,000 at 7% interest can grow it to almost $150,000 in 40 years without adding more money.
- Adding $200 monthly at 6% over 30 years grows to $200,896, even though only $72,000 was deposited.
Compounding Beyond Finance
- Compound interest impacts economic growth and inflation, causing exponential effects over long periods.
- Small differences in growth or inflation rates lead to huge value differences after many years.