Archive for June, 2011

Tuesday, 21st June 2011

Compound interest

Written by George Traganidas Topics: Personal Finance, Wealth Building

Compound interest is when the interest you have earned gains interest itself. For example, if you deposit £1000 in the bank and you get 10% interest per year, at the end of year 1 you will have £1100. Then at the end of year 2, you will have £1210. During the second year the interest is applied to your original amount (£1000) and to the interest that you gained at the 1st year (£10). This is how money multiplies over the years and it works for you. Notice that you have only deposited £1000, but then the money that you gain from interest multiplies by itself (together with your original amount) and works for you. This is the secret of how to become rich. Many of the richest people in the world have used this simple idea to create their fortunes, e.g. Warren Buffet, John D. Rockefeller.[…]

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