The Eighth Wonder of The World is Compound Interest so said Albert Einstein.
However, there is some controversy that he actually said it. Some writers give Baron Rothschild the credit. Others, Napoleon Bonaparte.
Whatever. And who cares who said it. They're all right. Compound Interest is magic.
Read the headline above again. If you were to invest just £5 per week (which you will not miss - give up that Starbucks just once) for 20 years and you will have banked £5,200. But if your savings grew at a compound rate of 5% your little nest egg would be worth £8,876.80
That's £3, 676.80 of compound interest.
Alber Einstein once quoted:
"Compoud interest is the eighth wonder of the world.
He who understands it, earns it ... he who doesn't ... pays it"
The Eighth Wonder of The World is based on compound interest.
But it is important to know the distinction between compound interest and simple interest.
Simple interest is calculated by multiplying the daily interest rate by the amount of money and by the time that the investment has been running.
Compound interest, on the other hand, is when the interest is calculated not only on the initial amount of money but also on the accumulated interest. Invested money grows faster with compound interest than with simple interest.
The interest part of the invested money accumulates with compound interest which leads to higher returns. With simple interest where the investor takes interest in each period.
If you use the Rule of 72 - it is compoud interest that is at work to help double your money.
You can become a millionaire using Einstein's Eighth Wonder of the World.
How? You might say.
Because together with time it really is magic.
If you are young enough it can be done. Here's an example:
Suppose our millionaire wannabee is a 30 year old stashing away £300 a month.
With a compound growth rate of 8% his Pension Pot would grow to £620,340.49
But if his Pension Pot grew by an average rate of 10% his Pot would be £975,687.73
O.K. not quite £1 Million but then again, over 35 years he has not increased his monthly contributions either. He almost certainly would increase his monthly payments.
Now, if his managed a growth rate of 10% and deferred his pension until agaed 70, he would have a whopping £1,593,333.20 to look forward to.
Go to our Pension Calculator and punch in a few "what ifs". You'll be amazed at what you can accomplish.
It's as clear as a bell. Like a snowball runig downhill.
Compound interest really is the Eighth Wonder of the World.
It's interest on top of interest. Great if you're earning it. Not so great if you're paying it.
By investing in your own DIY Pension you are already thinking growth, even if you may not quite appreciate it.
Our Pension Calculator alone should be enough to convince you about the power of compound growth. Play around with it.
Chris and Clem Meet Up - hopefully, the last time before lockdown easing
Chris and Clem Meet Up - at last! They can meet in the beer garden
Chris and Clem Meet Up and it is Chris' turn to do most of the talking. Chris' little windfall has allowed him to widen his portfolio. Chris vows of more.