“Compound interest is the eighth wonder of the world.
He who understands it, earns it…he who doesn't… pays it.”
Albert Einstein
How do you feel when I say the word ‘investing’?
Intrigued? Un-informed? Interested? Eager?
Maybe it brings up lots of wonderings …
How do I navigate the world of investing if I'm not a financial advisor or a big gun in the stocks and shares world?
How can I invest with confidence?
How does investing actually work?
How do I start and what do I need to know?
Well let me start with the thing that I wish I knew about and understood earlier, the thing referred to in that lovely Mr Einstein quote up above, and that’s COMPOUND INTEREST.
Stay with me … I promise it’s good stuff.
Here's how it works:
➡️ When you invest your money, it earns returns over time. These returns, also known as interest or dividends, are reinvested back into your investment portfolio.
➡️ Over time, these reinvested earnings start generating additional earnings of their own. As the years go by, the power of compounding takes effect, and your investment grows at an accelerating pace.
➡️ The real magic of compound interest happens over the long term. The longer you stay invested, the more time your money has to compound and multiply. The effect of compound interest becomes exponential, allowing your investment to grow faster and larger as time goes on.
➡️ By starting early and remaining committed to your investment journey, you harness the power of time and compounding, increasing your chances of achieving your financial goals.
➡️ It's worth noting that though compound interest can work in your favour when you're investing, it can also work against you when you're borrowing money. If you have debts, such as credit card balances or loans, the interest on those debts can compound and accumulate, making it harder to become financially stable.
➡️ Understanding the impact of compound interest on both your investments and debts is crucial for making informed financial decisions.
➡️ Even small contributions can make a significant difference when given the opportunity to compound over the long term. So, don't underestimate the power of compound interest in transforming your financial future.
Now that we’ve explored how compound interest works,
you can see how investing can be a powerful tool that can pave the way for financial growth, security, and independence.
Whether you have long-term goals such as retirement planning, saving for a down payment on a house, or growing your wealth for you and your family, investing and compound interest can help you achieve those objectives.