When people tell you to save your money early and for as many years as possible, it’s largely because they want you to compound your savings, unlocking major potential.
Over time, savings grow from both contributions made by you, as well as interest from the bank. Accounts with compound interest earn interest on the principle as well as the interest already accumulated. Over time, the more money you put away, the more interest you earn, and eventually, as the principle gets larger, it doesn’t just grow steadily, it starts to grow faster and faster.
Investments with compound interest are some of the best you can find. Consider the following:
• Investing $1,000 in a 5-year investment earning 5% simple interest per year, at the end of the term of the investment, will yield $1,250 (The original $1,000 plus $50/year of interest).
• Investing $1,000 in a 5-year investment earning 5% interest, compounding monthly, would yield $1,283 ($51 in the first year, $54 in the second, $56 for the third, $60 in the fourth and $62 in the fifth).
Regardless of how you approach it, compounding your savings is the best way to see exponential growth on your money. It takes some time, diligence, and a commitment to putting money away, but the end result is fantastic! Talk to the experts at Access Credit Union to learn more about your savings and how to grow them! Contact us today.