Compound interest – USA Prime Loans http://usaprimeloans.com/ Sun, 23 Jan 2022 02:33:27 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://usaprimeloans.com/wp-content/uploads/2021/10/icon-10-120x120.png Compound interest – USA Prime Loans http://usaprimeloans.com/ 32 32 Compound interest calculator • Benzinga https://usaprimeloans.com/compound-interest-calculator-benzinga/ Fri, 21 Jan 2022 20:35:44 +0000 https://usaprimeloans.com/compound-interest-calculator-benzinga/ When managing your money, compound interest can help you increase your net worth safely. In its simplest terms, compound interest helps money multiply at an accelerated rate. Review this information and determine which is best for your situation. What is compound interest? Simply put, compound interest multiplies the total amount saved by the annual interest […]]]>

When managing your money, compound interest can help you increase your net worth safely. In its simplest terms, compound interest helps money multiply at an accelerated rate. Review this information and determine which is best for your situation.

What is compound interest?

Simply put, compound interest multiplies the total amount saved by the annual interest rate to give you a total amount earned during the investment. You multiply your investment by the number of compounding periods. Some investments have longer capitalization periods than others, and some investments take a long time to mature while others evolve much faster.

How does compound interest affect your savings?

Compound interest works as a way your money works for you when it’s just sitting there. For example, if you take $100 (your “capital”) and put it under the mattress where it earns no interest, in 10 years you would have the same $100. However, if you could earn 5% interest compounded annually on that money, you would end up with $162.89 after 10 years, or $62.89 more. If you started with $5,000, the resulting amount is $8,144.47 or $3,144.47 more. That’s a big difference in results.

In today’s low interest rate environment – high yield savings accounts, money market funds and short-term certificates of deposit pay less than 1% interest – finding a place that would making 5% interest in 2022 without the risk of losing your principal is unlikely. Savers are unlikely to earn 30 years of risk-free, guaranteed interest at 5%, but you see how compound interest helps you.

If the compound interest rate is changed to a more modest and realistic compound interest rate of 1% over 10 years and you deposit $100, you would end up with $110.46 if your money was compounded annually (10, $46 more). The $5,000 example gives $5,523.11 or $532.11 more. Even though the returns aren’t great when you’re earning 1% interest versus 5%, they allow you to get money that you wouldn’t have had if it had just been left in a jar. The extra amount earned at 1% is not as satisfying as the higher rate of 5%, which is why investors today may turn to riskier financial vehicles like the stock market or US bonds. companies for higher returns.

How does the compound interest calculator work?

A compound interest calculator tells you how much money you can expect to see after a certain period of time with a specific interest rate. It handles the calculation for you so you can understand the return to expect.

For example:

You make an initial investment of $1,000: You can choose the amount you want. It’s never too late to start investing.

Contribute $100 to the investment per month: You can also contribute at different intervals, different amounts and with different goals. The account can be part of a trust or your own account.

More than 10 years: You decide the duration of the contributions. Some people save for retirement, but others save for the nearer future.

At 3% compounded annually: Every investment is different and it helps to know what kind of return you can expect.

In 10 years, you would have $15,100.57 if the interest rate stayed the same and you continued to contribute at that rate: You would have contributed $13,000 and earned $2,100.57 in interest. Using the calculator helps you determine how much you can expect to see. Plus, you can choose terms along the way to figure out how much money you’d see if you stopped saving sooner.

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Compound interest formula

A formula that tells you how much your principal balance will increase to (P’) based on the initial principal amount P appears below:

P’=P(1+r/n)^nt

Or:

P’ = the new principal amount
P = the initial amount of the deposit or the principal
r = the annualized nominal interest rate expressed in decimal
n = how often interest is compounded per year
t = the number of periods elapsed in years

The total amount of compound interest (I) generated by this investment is then equal to the new principal amount (P’) minus the amount of the initial deposit (P):

I = P’-P= P(1+r/n)^nt – P = P((1+r/n)^nt – 1)

Use compound interest to improve your finances

Using compound interest to improve your finances is just one way to save money for the future. Choose the most appropriate investments to grow your money based on your personal risk tolerance, targeting your goals and giving you the peace of mind you rightly deserve. You can use a compound interest calculator that helps you see the total amount of money you can earn over a number of calculation periods.

Check out Benzinga for more financial information, including savings accounts, stocks, and crypto.

Frequently Asked Questions

Can Compound Interest Make You Rich?

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Can Compound Interest Make You Rich?

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Patton Hunnicutt

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When you save with compound interest, you make your money work for you. However, saving with compound interest for a short time and at the low interest rates available in 2022 probably won’t be enough to help you build massive wealth.

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Understanding Compound Interest Is Key to Building Wealth or Avoiding Crushing Debt https://usaprimeloans.com/understanding-compound-interest-is-key-to-building-wealth-or-avoiding-crushing-debt/ Wed, 12 Jan 2022 08:12:00 +0000 https://usaprimeloans.com/understanding-compound-interest-is-key-to-building-wealth-or-avoiding-crushing-debt/ The more interest rates are compounded, the faster the total amount of money accumulates. Pier/Getty Images Compound interest occurs when previously earned interest is added to the principal amount invested or borrowed. It is commonly described as “interest earned on interest”. Compound interest can work to your advantage as your investments grow over time, but […]]]>

The more interest rates are compounded, the faster the total amount of money accumulates. Pier/Getty Images

  • Compound interest occurs when previously earned interest is added to the principal amount invested or borrowed. It is commonly described as “interest earned on interest”.

  • Compound interest can work to your advantage as your investments grow over time, but work against you if you’re paying off debts, like credit cards.

  • If you are borrowing money, you want the interest to compound as infrequently as possible. if you’re investing, you want compound interest as often as possible.

  • Visit Insider’s Investing Reference Library for more stories.

Warren Buffet once said that his wealth came from “a combination of living in America, certain lucky genes and compound interest”.

The billionaire investor meant that the interest from his investments helped him create his fortune. But Buffett also liked to warn people about the dangers of getting on the wrong side of the compound interest equation.

While compound interest is arguably the most important part of building wealth, it can also be one of the best ways to ruin your finances: having to To pay compound interest can cause debt to spiral out of control.

Most people think of interest only in terms of high or low rates. But understanding how interest is calculated, or compounded, is also important. Knowing how compound interest works can help you avoid costly mistakes and get the most out of your money, whether you’re depositing it, investing it, borrowing it, or spending it.

What is compound interest?

All interest is a percentage charged or earned by a lump sum of money. Compound interest is a kind of interest based on the addition of the initial principal – i.e. the initial amount invested or borrowed – with the accrued interest from previous periods.

For example, let’s say you have $100 in a savings account, and it earns interest at 10%, compounded annually. At the end of the first year, you would have $110 (100 principal + 10 interest). At the end of the second year, you would have $121 (110 in principal + 11 in interest). At the end of the third year, you would have $133.10 (121 in principal + 12.10 in interest). etc

In other words, with compound interest, you earn interest on interest.

The revelation comes when you realize that compound interest causes the principal to grow exponentially, which means that as the interest accumulates and the amount of money increases, the rate of growth accelerates.

How quickly your money grows depends on the interest rate and compounding frequency. Interest can be compounded daily, monthly, quarterly or annually, and the more frequently it is compounded, the faster it accrues.

In the long run, “the compounding magic” can really add up. Here’s how an initial investment of $5,000 would grow if compounded semi-annually over a 35-year period, at an annualized interest rate of 5%:

If you are the one income money on interest, daily or monthly compounding is preferable to yearly. On the other hand, if you are accused interest, monthly or annual capitalization will save you money compared to daily.

Compound interest vs simple interest

While compound interest is “interest on interest” – calculated on both the principal amount and accrued interest – simple interest is totally different. Simple interest is calculated alone on the initial capital balance or on the deposit.

Let’s go back to our $100 savings account, but this time it pays 10% simple interest. This means that the 10% interest rate only applies to your initial capital of $100, so you earn $10 each year. Period. At the end of the first year, you would have $110. But at the end of the second year, you would have $120. At the end of the third year, $130 — compared to $133.10 in the compound interest account.

Even though we’ve used small numbers here, you can see how the further you go, the more compound interest pays you – and the more it outstrips simple interest.

Simple interest tends to be used in most student loans, mortgages and installment loans – when you pay a store to buy a major appliance over a period of time, for example.

How to Calculate Compound Interest

Calculating compound interest sounds complicated, but it’s actually as easy as plugging a few numbers into the right formula.

Compound interest formula

The compound interest equation essentially adds 1 to the interest rate, raises that sum to the total number of compound periods, and multiplies the result by the principal amount. Shayanne Gal/Business Insider

Let’s say you decide to deposit your $10,000 annual bonus into a 5-year certificate of deposit (CD). You leave this money in the CD for the full five years, and it earns an annual interest rate of 4% compounded daily. The numbers you put into each variable are:

  • P = $10,000

  • r = 0.04

  • n = 365

  • t=5

The formula gives you $12,213.89 for A. This is the total amount of money you would have in your money market account after five years. That means you earned $2,213.89 in interest.

How Compound Interest Can Work Against You

As compound interest can be beneficial for saving, investing, and building wealth, it’s important to note that it can work against you if you’re paying off debt. In fact, compounding is part of what makes carrying an outstanding balance on a credit card so deadly.

In fact, the example above could be turned upside down by imagining that you have a balance of $10,000 on a credit card (we’ll assume that’s the same 4% compounded daily, even though the cards’ APRs credit are generally much higher). You plan to put nothing else on the card and pay it all off in five years. Even if you chipped away at your balance and paid an extremely low interest rate, you could still end up paying a lot of interest – over $1,000 in fact.

And if you were to pay 18% compounded daily — which is closer to the average credit card interest rate — you’d pay $5,236 in interest after five years.

How to get the most out of compound interest

The best way to take advantage of compound interest is to save and invest.

Opting for a savings account that pays interest — like high-yield savings accounts, money market accounts, and CDs — is one way to make compound interest work in your favor. When choosing an account, you’ll want to look for one with low fees and the highest annual percentage yield (APY), which is the interest you can earn on your deposit over a 12-month period.

It’s worth noting that interest rates on even the best savings accounts barely outpace inflation, so they’re best for short-term savings. If you want to build long-term wealth, whether it’s savings for retirement or a goal years from now, investing your money will really make it work for you.

Savings products offer interest rates that typically range from 0.01% to 3%, depending on the state of the economy, while the average historical rate of return on the stock market is 10%, before adjustment for inflation.

When opening an investment account like a 401(k), IRA, brokerage account, or mutual fund, you have the option of automatically reinvesting any dividends or interest your investments earn. This means that your returns will compound.

The financial statement

Compound interest can be your friend or your foe, with the power to make you rich or bankrupt, depending on your side.

Luckily, you don’t have to be a math whiz to figure out whether interest on an account will help or hurt you. If you’re borrowing money, you want the lowest interest rate possible, compounded as infrequently as possible. If you’re investing money, the reverse applies: you not only want a good interest rate, but one that accumulates early and often.

And when comparing loans, credit card APRs, savings account APYs, or other securities yields, check how often interest is compounded and make sure you’re comparing like-for-like. Two interest rates can be nominally the same, but if they accumulate at different rates, it can make a big difference.

Whether earning it or paying for it, the nature of compound interest means it’s exponentially – pun intended – better for your wallet.

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Increase your wealth by harnessing the power of compound interest in 2022 https://usaprimeloans.com/increase-your-wealth-by-harnessing-the-power-of-compound-interest-in-2022/ Fri, 31 Dec 2021 16:00:00 +0000 https://usaprimeloans.com/increase-your-wealth-by-harnessing-the-power-of-compound-interest-in-2022/ Have you ever wondered why some people seem to be better off than others when they seem to have similar lives and consistently track income, families and lifestyle. This is usually because they have better financial behaviors, and many of them take advantage of this powerful tool known as compound interest. It’s so powerful that […]]]>

Have you ever wondered why some people seem to be better off than others when they seem to have similar lives and consistently track income, families and lifestyle.

This is usually because they have better financial behaviors, and many of them take advantage of this powerful tool known as compound interest.

It’s so powerful that the story goes when Albert Einstein was once asked what mankind’s greatest invention was, he said, “Compound interest. “

If you compare compound interest to a horse, it is not a thoroughbred, it is more of a workhorse.

READ MORE:
* Do you want a mortgage? Prepare for a closer examination
* Why should you invest your money rather than save it
* KiwiSaver Deals: How Young People Can Make the Most of Savings

And like all work horses, it needs to be considered, well fed, watered and trusted to do its job.

So, let’s look at the workhorse of the financial world.

Setting aside just $ 10 per week in savings can generate wealth through compound interest.

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Setting aside just $ 10 per week in savings can generate wealth through compound interest.

Compound interest is a fairly simple concept – it’s when you earn interest on both the money you save and the interest you earn on that money. Every year you earn interest again on interest, so interest is actually interest.

Basically, it’s your money that works for you instead of your money.

American author, inventor and scientist Benjamin Franklin described it simply: “Money makes money. And the money that the money brings brings in the money.

Financial Advice New Zealand Managing Director Katrina Shanks says compound interest makes your money work for you.

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Financial Advice New Zealand Managing Director Katrina Shanks says compound interest makes your money work for you.

But compound interest can work against you as well as it does in your favor. If you are in debt, you could be paying compound interest on the money you borrow.

But let’s focus on the compound interest on your savings (now that you have your New Year’s resolutions and plan to save some more this year).

Here are four quick tips on how to save that year this year, so you can take advantage of compound interest.

Go over all of your income and expenses over the past three months and see if there is any waste that you can reduce to provide a surplus.

Take those surpluses you have now created and put them in another account to make sure you don’t spend them. And then transfer that amount every payday.

Decide what your priority is for those surpluses – maybe pay off your credit card, create an emergency peace of mind fund, put it in KiwiSaver if you’re saving for a house, or even a managed fund.

Try to be disciplined with these new funds and make sure that they are used for the purpose you have decided to meet your needs and goals.

Let’s take a look at the effect of compound interest on your savings.

Remember, the earlier you start saving, the more compound interest you will receive.

Your money is working for you – sounds good, doesn’t it?

I took these calculations from the Sorted.org.nz website: This example saves $ 10 per week from age 20. The results are based on an interest rate of 2.5% after tax and taking inflation into account.

If you started saving $ 10 a week at age 20, at age 60 you would have saved almost $ 15,000.

Compound interest does a lot of work in increasing your wealth.

I used $ 10 because most people could save $ 10 a week, but imagine if you increased that amount every year to align yourself with a raise in pay or a new job.

The impact on your savings and your assets could be significant.

Again, it comes down to good financial behavior.

Start when you’re young, and you could be prepared for life just by trimming. Even if you’re older, it’s never too late to reap the benefits of saving.

Compound interest is so simple, but it never comes to mind when we consider why saving is so important or how effective it can be in the long run.

In the words of my financial advisor – have a plan, revise the plan, stick to it, then enjoy.

Financial security and freedom can happen with just a few small changes.

Make a positive change for yourself in 2022. Save today.

Financial Advisor, New Zealand Managing Director, Katrina Shanks


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Committing a crime in UP, recovering it with compound interest: Ex-DGP | Lucknow News https://usaprimeloans.com/committing-a-crime-in-up-recovering-it-with-compound-interest-ex-dgp-lucknow-news/ Tue, 21 Dec 2021 23:05:00 +0000 https://usaprimeloans.com/committing-a-crime-in-up-recovering-it-with-compound-interest-ex-dgp-lucknow-news/ repression of crime: ex-DGP AK Jain addressing the conclave Lucknow: If you engage in criminal activity in Uttar Pradesh, you will get it back with compound interest, former DGP AK Jain said, speaking to “Destination UP Conclave” on Monday. He said the elements of the Mafia were treated harshly and the way they were crushed […]]]>

repression of crime: ex-DGP AK Jain addressing the conclave

Lucknow: If you engage in criminal activity in Uttar Pradesh, you will get it back with compound interest, former DGP AK Jain said, speaking to “Destination UP Conclave” on Monday.
He said the elements of the Mafia were treated harshly and the way they were crushed will be an example for generations to come. “Government lands have been freed from criminals and it will have a permanent impact if it continues like this for a few years,” said the former DGP.
“The action taken in the aftermath of Bikru’s carnage will be remembered for a long time, the whole gang was wiped out. The gang would extort money and get help. It is for this reason that no development or investment was taking place in the state, ”he said.
The former DGP said the UP was infamous for organized crime, kidnappings for ransom and occupation of government land, but since the current government came to power there has been a complete change; criminals keep a low profile or serve jail time.
The former DGP praised the UP Chief Minister Yogi Adityanath for his administrative prowess and for keeping the police on their toes by giving specific instructions on cases, arranging video conferences with the police before any big event and emphasizing that no one should be spared. “No politician can now interfere in the work of the police,” he said. “The CM itself examines all sensitive cases,” he said. The way UP CM responded to violence during the anti-CAA and NRC protest in Lucknow and other towns across the state is commendable and after its action, no incidents or violence were reported in the State.
Not only the police, but the capacities and technical resources of the counterterrorism brigade and the special force are strengthened, he said. The ATS is now also stationed in Deoband, Jewar Airport and near the Nepalese border. UP police recently carried out a massive recruitment drive that was long overdue, he added.
“CM did not care about powerful lobbies and instead created four police stations in the UP. The idea of ​​a police station in Kanpur arose a long time ago, but the decision was scrapped before the new commissioner took charge, ”Jain said, adding credit for ensuring that he there was no visible tension in the state before the festivals and the relaxed atmosphere goes to CM. “The revenues have also increased by several times because of the atmosphere in the state. The police budget is also increased, which was the need of the hour, ”he said.
“You can change the perception, you can convert it from a bad job to a good job and that’s what policing is. The perception of law and order should be equal for the rich and the poor, ”he said.

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Now it’s easy to earn compound interest on your crypto holdings https://usaprimeloans.com/now-its-easy-to-earn-compound-interest-on-your-crypto-holdings/ Tue, 21 Dec 2021 14:54:59 +0000 https://usaprimeloans.com/now-its-easy-to-earn-compound-interest-on-your-crypto-holdings/ Breadcrumb Links Business essentials The BlockFi Interest Account (BIA) is the world’s first compound interest cryptocurrency savings account Author of the article: StackCommerce Release date : Dec 21 2021 • 1 hour ago • 4 minutes to read Photo by Executium /Unsplash The opinions and recommendations are impartial and the products are selected independently. Postmedia […]]]>

The BlockFi Interest Account (BIA) is the world’s first compound interest cryptocurrency savings account

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This article was created by StackCommerce. Postmedia may earn an affiliate commission on purchases made through our links on this page.

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In case you haven’t noticed, 2021 was another record year for crypto . In February, the CME began trading Ethereum futures, and the price of Ethereum rose from $ 1,500 to over $ 4,000 in just nine months. In April, Coinbase went public on the Nasdaq at $ 400 per share, bringing the valuation of the world’s largest cryptocurrency exchange to nearly $ 100 billion.

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In September, El Salvador became the first country in the world to adopt Bitcoin as legal tender, and countries like Brazil may soon follow suit. And last week, the SEC approved a Bitcoin futures EFT. Soon after, the price of Bitcoin hit $ 60,000, rising 8000 percent just five years ago. If you’ve been waiting for some sort of sign that the crypto is here to stay, 2021 is it. With the global crypto market now worth over $ 2 trillion, the question is no longer should I invest in crypto. It is How? ‘Or’ What should i invest in crypto. And while there are a lot of different answers to this question, the most sensible one might just be an innovative crypto startup called BlockFi which allows you to earn compound interest on your holdings.

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Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is a online crypto investment and management platform . It was created to bridge the gap between the worlds of traditional finance and crypto. To achieve this goal, the company has used several rounds of venture capital funding over the past four years to make traditional financial products and services available to crypto investors for the first time.

How are things going so far? Probably much better than anyone other than Prince and Marquez would have imagined. Just over a year ago, BlockFi was valued at $ 435 million. Today, they are valued at $ 3 billion. And there were rumors that another round of funding could soon push them to $ 5 billion.

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Today, BlockFi offers crypto investors a nice variety of wealth management services. However, their flagship product, the BlockFi Interest Account, is changing the way people think about and invest in crypto .

The BlockFi Interest Account

The BlockFi Interest Account (BIA) is the world’s first compound interest cryptocurrency savings account. With compound interest savings accounts, the interest you earn over a specified period is added to the principal balance, so that you end up earning interest on your interest and growing your wealth exponentially. Compound interest has been available in traditional finance for centuries. However, it was not available to crypto investors until now.

The interest rates offered on BlockFi interest accounts are quite impressive. Right now you can earn:

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  • Annual percentage return of 4.5% on Bitcoin deposits up to 0.1 BTC
  • 5% annual percentage return on etherium deposits up to 1.5 ETH
  • Annual percentage return of 4.75% on Litecoin deposits up to 20 LTC
  • 8% Annual Percentage Return on Gemini Deposits up to USD 40,000B
  • 8% Annual Percentage Return on USD Coin Deposits up to C $ 40,000

The GUSD and USDC rates are particularly important because GUSD and USDC are “stable coins” that are permanently tied to the US dollar. These high interest rates thus provide crypto investors with a built-in way to mitigate some of the risks involved in trading other cryptocurrencies.

BlockFi is more than compound interest

While compound interest on crypto holdings might be the biggest carrot on BlockFi’s stick, it’s not the only one. BlockFi is a complete crypto platform which allows you to easily manage your crypto assets and optimize portfolio allocation. Users can add funds to their account with their local fiat currency, making deposits and withdrawals directly from their checking accounts.

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BlockFi also offers crypto-backed loans . Using your crypto holdings as collateral, you can get loans worth up to 50% of the value of your assets at a very competitive 4.5% APR. This allows you to mine your crypto holdings without cashing out, so you won’t be left out if the value of a currency hits you. used to have in your wallet soars down the road.

Finally, BlockFi’s latest product is the BlockFi Rewards Signature Visa Card . With no annual fees or overseas transaction fees, this credit card allows you to earn 3.5% in Bitcoin for every dollar spent for the first three months, then 1.5% on every dollar spent up to 50,000 $ per year, and 2 percent on every dollar you spend over $ 50,000 per year. It also allows you to earn 0.25% in Bitcoin on all qualifying transactions up to $ 500 in Bitcoin per month, plus $ 30 in Bitcoin for each customer referral.

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Put your crypto to work Earn more crypto

Making money on crypto took a lot of patience and a lot of luck. You would pick a coin that you thought was ripe for further appraisal, decide how much to buy, then wait and pray that it all worked out. It was more like gambling than to invest.

BlockFi simplifies investing in crypto. When you buy with them, you know exactly what to expect without sacrificing the conveniences and benefits of traditional financial products.

So if you are looking for a smarter way to build and manage your portfolio of 21st century digital assets, you need to take a look at BlockFi .

Prices subject to change.

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Unleash the power of compound interest: keep snowballing for your retirement https://usaprimeloans.com/unleash-the-power-of-compound-interest-keep-snowballing-for-your-retirement/ Tue, 21 Dec 2021 09:02:54 +0000 https://usaprimeloans.com/unleash-the-power-of-compound-interest-keep-snowballing-for-your-retirement/ SPONSORED – Most South Africans don’t have enough money to retire comfortably because they take their retirement savings in cash when they change jobs. When saving for retirement, two golden rules for unleashing the power of compound interest – that is, when you earn interest on interest – are: · Start investing for retirement as […]]]>

SPONSORED – Most South Africans don’t have enough money to retire comfortably because they take their retirement savings in cash when they change jobs. When saving for retirement, two golden rules for unleashing the power of compound interest – that is, when you earn interest on interest – are:

· Start investing for retirement as soon as you start working and try to contribute at least 15% of your pre-tax income in retirement, and

· Preserve your retirement savings in the event of a job change.

There are different ways to store. You can keep funds with your former employer’s retirement fund, or you can transfer your savings tax-free to a preservation fund or retirement annuity, or your new employer’s retirement fund.

Preserving means that you avoid paying a large portion of your savings to tax when you withdraw your retirement savings. In addition, the money continues to grow, without interruption.

A preservation fund not only allows you to keep your savings and investment income tax-free until you retire, but also allows you to make a total or partial withdrawal before the age of 55, age from which you can withdraw from a preservation fund. A retirement pension does not give you access to money before age 55.

Nashalin Portrag, Head of FundsAtWork, Momentum Corporate, said: “Saving for retirement is like a snowball rolling down a hill, getting bigger as it picks up more snow. The layers of snow pile up on top of each other, creating an even bigger snowball, which picks up even more snow. Snow is compound interest. If you take your savings in cash when you change jobs, your savings snowballs and you have to start saving again, only now the time for retirement is much shorter.

Portrag concludes, “The choices you make today will have a huge impact on your future lifestyle. Talk to your pension fund’s benefit advisors or financial advisor to be fully informed when making these critical decisions.

Momentum Corporate has just launched an exciting new website to demystify the tough terms around employee benefits. Visit employeebenefitsexplained.co.za for simple explanations of other employee benefits terms and concepts


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Weekend Essay: Is Compound Interest Really the Eighth Wonder of the World? https://usaprimeloans.com/weekend-essay-is-compound-interest-really-the-eighth-wonder-of-the-world/ Fri, 10 Dec 2021 15:00:59 +0000 https://usaprimeloans.com/weekend-essay-is-compound-interest-really-the-eighth-wonder-of-the-world/ I’m not used to questioning geniuses, especially in areas where I’m vulnerable like math. But to quote Dr Emmett Brown of Back to the future: “If you think about it, you can accomplish anything. “ So this is it. Albert Einstein called compound interest the eighth wonder of the world and is said to have […]]]>

I’m not used to questioning geniuses, especially in areas where I’m vulnerable like math. But to quote Dr Emmett Brown of Back to the future: “If you think about it, you can accomplish anything. “

So this is it. Albert Einstein called compound interest the eighth wonder of the world and is said to have said: “He who understands it, wins it; whoever doesn’t pay for it.

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These words not only carry the seriousness of Einstein’s authority, but also ring true eloquence.

The power of compound interest is so powerful that everyone you talk to in the financial world supports it. This has certainly been the case in my seven years of experience as a retired journalist. I have never met anyone who called compound interest hogwash. I have also never heard anyone make such an argument in the print or broadcast media.

The truth of compound interest is as obvious as the opinion of economists that true free trade is good for all parties. I have certainly read that this is the one point that economists of all stripes are most likely to agree on.

The reality of compound interest and true free trade in our modern world has a status similar to that of a round planet. Whatever you think, these are facts of life and affect us all like gravity. Anyone who questions them will have their eyes reserved for Flat Earthers.

But it helps to play devil’s advocate without talking about the fun of it. I believe the benefits of compound interest for borrowing a sentence from Einstein are relative. Before I tell you why I must share the journey to this perspective.

This essay was inspired by Robert Gardner who was the keynote speaker at Money Marketing Interactive London at Emirates Stadium. I tweeted this comment from him which inspired many responses.

Ryan Murphy, who works at the Citizens Advice Bureau, replied: “For most families, boarding for children is not the priority. 1. Clear the debt. 2. Secure your own future – children have more time to build up their own savings. 3. Save for the child’s college fees. 4. Let the child save with higher rate relief, not your base rate. Plus, who gets paid per day? I don’t have daily cash for £ 5 a day. I get £ 0 29 days a month. I could consider saving £ 150 a month maybe.

Berlin writer and publisher Pete Carvill added: “A five a day will cost around £ 150 a month. I don’t know how many families can afford this within their budget.

Robert Gardner hit back and said: ‘The average family spends £ 1,300 on BOGOF offers a year that they don’t need. It’s £ 100 a month, which is a good start. I think a lot of families can’t start saving for their future.

All these points are valid and relate to the observation that compound interest is the best ally of your savings the earlier you start. In other words, the money you save in the first few years will give you the most bang for your buck.

This is because those savings will have the longest time to grow until you use them up and grapple with volatility along the way. But these reviews show how much a person can save, and when everything is relative.

Some may save before and more than others due to favorable circumstances and therefore compound interest is more of a friend to them. It got me asking this follow-up question on social media.

I believe compound interest, or the eighth wonder of the world, depends on where you stand in relation to it. My theory was reinforced by a conversation with my friend, Aegon’s pension manager, Steve Cameron.

Cameron, who is an actuary and the Ninth Wonder of the World, has an insightful view of real growth rates (investment returns minus inflation).

He says, “In times of high interest rates it’s the eighth wonder of the world, when you have low interest rates it’s not as magical as you think.

“So an annual interest rate of 5% for 20 years makes £ 100 into £ 265. If it’s 10% over 20 years, it becomes £ 673. But if the interest rates are 0.1%, then your £ 100 is worth £ 102 in 20 years.

“So the compound is an integral part of the element of interest. Therefore, if you have to use real return to inflation, it doesn’t sound as exciting. When you project the actual growth rate, it is small and loses the marvelous. “

The table below shows the diminishing returns of compound interest when interest rates are low.

Year 0.1% Interest rate 1% interest rate 5% Interest rate 10% interest
0 100.0 100 100 100
5 100.5 105 128 161
ten 101.0 110 163 259
20 102.0 122 265 673
30 103.0 135 432 1,745
40 104.1 149 704 4,526
Aegon Analysis, December 2021. Interest compounded annually

These two charts from Aegon also provide comparisons of £ 100 over 20 years and 40 years respectively.

Credit Aegon
Credit Aegon

There are other considerations as well: Inflation can dampen the power of compound interest by reducing purchasing power in real terms. the Bank of England Inflation Calculator lets you see how much £ 100 would cost in 2000, and also how much £ 100 in 2000 is worth today (2019).

Bank of Credit of England

Here’s another chart from Aegon showing the impact of the £ 100 failing to keep pace with 3% inflation over time at low interest rates. It shows how a small lag each year turns into a large loss over longer periods of time.

3% inflation at 0.1% interest rate means £ 100 will be worth £ 32 in today’s money terms 40 years from now, while 1% interest rate means £ 100 will be worth £ 46 in 40 years.

Year 0.1% Interest rate In today’s monetary terms 1% interest rate In today’s monetary terms
0 100.0 100 100 100
5 100.5 87 105 91
ten 101.0 75 110 82
20 102.0 56 122 68
30 103.0 42 135 56
40 104.1 32 149 46
Aegon Analysis, December 2021. Today’s monetary terms assume inflation of 3%. Interest compounded annually

A final point in all of this was Gardner’s suggestion that pensions could be a savings vehicle for children.

Peter Carville wrote on Twitter and said: “I would say we need to rethink the idea of ​​retirement a bit. I am a writer and, physically, I should be able to write until the day they take me away, pencil in hand. Someone like a firefighter may be physically able to do their job until the age of 50.

This was followed by a review from Certified Financial Planner David Hearne who said: “All the more reason not to put money in our children’s pensions, we hardly know how our own life is going to be, let alone. of our newborns. Numerous ways to save and compose money for family allowance without tying it up in a pension for 57 years.

Hearne does not dispel the power of compound interest, but argues that its power can be harnessed in a different form of a pension.

Which brings me back to my central point, your line on compound interest depends on where you relate to it in time and space. The stars really need to align for the eighth wonder of the world to materialize.



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Podcast: Is Compound Interest Really the Eighth Wonder of the World? https://usaprimeloans.com/podcast-is-compound-interest-really-the-eighth-wonder-of-the-world/ Fri, 10 Dec 2021 14:46:54 +0000 https://usaprimeloans.com/podcast-is-compound-interest-really-the-eighth-wonder-of-the-world/ Our website uses biscuits to improve your user experience. If you continue to browse we will assume that you consent to our use of biscuits. More information can be found in our Privacy Policy. Skip to content In our last weekend essay, editor-in-chief Michael Klimes examines whether compound interest really is the eighth wonder of […]]]>


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In our last weekend essay, editor-in-chief Michael Klimes examines whether compound interest really is the eighth wonder of the world.


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Poll: Is the power of compound interest overvalued? https://usaprimeloans.com/poll-is-the-power-of-compound-interest-overvalued/ Wed, 24 Nov 2021 08:00:00 +0000 https://usaprimeloans.com/poll-is-the-power-of-compound-interest-overvalued/ At Money Marketing Interactive London, St James’s Place Investment Director Rob Gardner said: “We have 11 million children in the UK and only 100,000 have a pension. “If you invest £ 5 a day from birth, they will have £ 35,000 saved in every 10. “If you then stop saving, the compound interest will pay […]]]>

At Money Marketing Interactive London, St James’s Place Investment Director Rob Gardner said: “We have 11 million children in the UK and only 100,000 have a pension.

“If you invest £ 5 a day from birth, they will have £ 35,000 saved in every 10.

“If you then stop saving, the compound interest will pay them £ 1million out of 60.”

The comment sparked a bit of debate on Twitter …

What do you think? Please vote and comment.

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What is compound interest and how do I calculate it? https://usaprimeloans.com/what-is-compound-interest-and-how-do-i-calculate-it/ Fri, 19 Nov 2021 01:10:07 +0000 https://usaprimeloans.com/what-is-compound-interest-and-how-do-i-calculate-it/ In a low interest rate environment, growing your money can be difficult. One way to make your money grow is to take advantage of compound interest. So the sooner you start saving, the more you could grow through capitalization. Banks use interest rates to encourage customers to open savings accounts and term deposits. As a […]]]>

In a low interest rate environment, growing your money can be difficult. One way to make your money grow is to take advantage of compound interest. So the sooner you start saving, the more you could grow through capitalization.

Banks use interest rates to encourage customers to open savings accounts and term deposits. As a general rule, the higher the interest rate, the more your money will grow. Financial institutions calculate interest as simple or compound interest.

What is simple interest versus compound interest?

Simple interest offers a fixed rate over a specified period. For example, if you invest $ 5,000 at 1% interest for a year, you will receive $ 50 in interest at the end of the year.

On the other hand, compound interest earns interest on the interest already earned on your savings. Most term deposits and savings accounts offer compound interest. You don’t have to wait until the end of the term to receive interest. You can choose to receive it daily, weekly, monthly or quarterly, depending on the type of account. This means that your savings grow faster when interest is compounded.

How to calculate compound interest

An easy way to calculate compound interest is to use the following formula:

A = P * (1 + r) ^ n

Or:

  • A = final amount
  • P = principal
  • R = interest rate
  • N = number of periods

To calculate monthly compound interest on a savings account, divide the interest rate by 12 and replace N with the number of months you invest.

Here is an example to help you understand. Suppose you invest $ 10,000 for two years at the rate of five percent per annum and the interest is compounded monthly. Using the formula above, the closing balance after two years is:

A = $ 10,000 * (1 + 0.0042) ^ 24 = $ 11,049.41

You should divide the annual interest by five percent by 12 because the interest is compounded monthly. In addition, the number of periods is 24 months because the investment horizon is two years.

How to increase savings using compound interest?

In low interest rate situations, your savings may grow only with inflation. But you can increase your savings by regularly adding money to your account when it is affordable. The more the deposit amount increases, the higher the interest paid. With a disciplined and diligent savings plan, you can grow your money for the long haul.

What should you know when calculating compound interest?

  1. First of all, you need to know the amount of the initial deposit, also known as the principal. This is the amount on which interest is calculated.
  2. Then the interest depends on the duration of the investment. The longer the period, the higher the interest paid.
  3. Another factor that determines your return is the interest rate, which is usually the standard annual rate. Do not confuse the rate with a bonus or introductory interest rate that you might receive when opening the account.
  4. You will need to check how often interest is calculated, whether it is daily, monthly or annually. Generally, your money will grow faster if interest is paid more frequently.
  5. Finally, the interest depends on how often you deposit money into your savings account. For example, if you receive additional funds via a Christmas gift or bonus, depositing the money into your account will help you earn more interest.


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