How Compound Interest Can Help You Save
Compound interest is a powerful tool that can help you save money through savings and investment accounts. It works by adding together small amounts of interest and compounding it to help your assets grow over time. This can be helpful in pursuing your financial goals.
What is compound interest?
Compound interest is a mathematical term that refers to the increase of an amount of money over time due to the addition of interest. The more often interest is added, the greater the compound interest will be. Compound interest can help you pursue your financial goals by helping you earn more money over time.
Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Interest can be compounded on a daily, monthly or yearly schedule depending on the type of account.
How can compound interest help you pursue your goals?
In order to pursue your financial goals, it helps to make the most of every minute. And compound interest can do just that. Investing money in a compound interest account can significantly increase the money you'll earn compared to regular savings accounts. For example, if you put $10,000 into a savings account that pays 2% annual interest, after 10 years your account will have increased to $11,111. With compound interest, that same biannual interest rate and principal amount of $10,000 will grow to over $12,189 by the end of the decade. *
Compound Interest Investments
Another benefit that comes from compounding is when it comes to investments. The same difference with regular saving accounts and compound interest accounts applies here. When you make regular investments over time, you may be able to gain a greater return on your money than if you made one large investment. This is because the total value of your investments may be greater than the initial investment, even if the individual investments have smaller returns.
As you're starting out and planning for your future, it's important that you define your financial goals. Whatever they are, you can help maximize the amount of money you make over time by seeking out savings accounts and investments that apply compound interest.
When you’re ready to see how the power of compound interest can help you save for years or even decades and help you pursue your financial goals, contact the office.
*These examples are hypothetical only, and do not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.
The rate at which compound interest accrues depends on the frequency of compounding; the higher the number of compounding periods, the greater the compound interest.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may give legal or tax advice.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.