The Power of Compound Interest

According to Albert Einstein, “The Compound Interest is the greatest Force in the Universe.” Einstein also once said, “The Compound Interest – 8th Wonder of the World.”

The Understanding of Basics of The Compound Interest means what is Compound Interest & How it works is very necessary to get Rich & Financially Free.

Now What is Compound Interest?

Well, to understand, What is Compound Interest, You have to first understand What is Simple Interest?

- The Simple Interest -

The Simple Interest means every year you get the interest on the basic amount. Say for Example, If you Invest Rs.100 today at a rate of 10% per Annum interest rate than after 1 year how much interest you will earn?.

Well, Rs.10 (10% of Rs.100 is Rs.100). So your Total Balance will be now, Rs.110. (Rs.100 + Rs.10 earned as an Interest).

Now how much you earn ate the end of Year 2? Well, again Rs. 10. So your ultimate balance will be Rs.110+10 = Rs.120.

So what will be your Balance after 10 years at a rate of 10% per Annum Simple Interest?

Well, Rs.100 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 = Rs.200

So The Simple Interest means you will earn Rs.10 per Annum at the constant rate forever.

- The Compound Interest -

Now, The Compound Interest means every year you get the interest on the previous amount and not on the Basic Amount. In real life, There is nothing like Simple Interest. In the real world, only compound interest exists.

So today suppose you invest Rs.100 at a rate of 10% per Annum, Compounded Annually than after 1 year your Balance will be Rs.100 + 10 = Rs.110.

At the end of year 2, You will earn 10% interest not on Rs.100, the basic amount but on Rs.110, The Previous Amount.

So at the end of year 2, your balance will be Rs.110 + Rs.11 (10% of 110) = Rs.121.

At the end of year 2, your Balance will be Rs.121 + Rs. 12.1 (10% of 121) = Rs. 133.1

At the end of year 3, your Balance will be Rs.133.1 + Rs. 13.31 (10% of 133.1) = Rs. 146.41

And so on……..

At the end of Year 10, your Balance will be Rs.285.31

It is Rs.85.31 higher than in comparison to the Simple interest. Means in case of Simple interest at 10% per Annum, your 100 rupees invested will become Rs.200 after 10 years while in case of The Compound Interest at 10% per Annum, it will become Rs.285.31 and that is Rs.85.31 more…….!!!!

This is the power of the Compound Interest. Initially it grows in linear proportion but later on it grows in geometrical proportion.

When you take a Credit Card Debt or any other kind of Loan, The Compound Interest work against you and make you poor or even Bankrupt. While whenever you invest your money in some Assets, The Compound Interest work in favour of you & make you Rich, Ultra-Rich.

The Compound Interest over the time is so powerful that, it multiplies your wealth in a breathtaking way….!!!!!

Because of the Compound Interest, the Rich becomes richer over the time. Because of the Compound interest, the 90% of world’s Wealth is concentrated in 10% of the hands while rest of the 10% wealth, shares 90% of people.

Remember, The Golden Rule of Compound Interest,

“Whenever you Save & Invest your Money, The Compound Interest starts working for you and make you rich over the time & Whenever you take any kind of Debt (Loan) means whenever you Borrow Money The Compound Interest starts working against you and make you poor or Bankrupt over the Time.”

This is why Financial Advisors & Finance Gurus say you that, Start Savings & Investing as early as possible in your life means Now….. Because the longer you stay invested, the compound interest will work for you longer and make you more rich over the time………!!!!!!!!!!!