//Confounded by Compounded?


There are two important aspects to successful saving:

  1. Consistent saving
  2. Compounding interest

Compounding interest means you earn interest on your interest. Sound confusing? Well, it’s really not. It just means that if you have $50 in your savings account and earn $1 of interest, you will have $51. You will then earn interest on that $51, not just the original $50. In time, the magic of compounding really adds up!

The interest or dividend paid on savings varies form one institution to another, and so does the method of computing the interest. Six percent compounded quarterly will yield greater earnings than six percent compounded semi-annually or annually. The more frequently your interest is compounded, the more frequently money is added to your account.

Combine compounding interest with a consistent savings plan, and you have an unbeatable combination.



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