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First, we need to understand how
compound interest works. It's how your money grows!
Getting this will help you understand the best way to save and
invest. Yes, it's math... But, not the math of text
books... This is the real stuff, and it's very simple.
Let's invest
$1.00
in an account that pays
12%
interest each year... and let's say that the account is
compounded yearly.
Compounded
yearly
means that, at the end
of each year, they add the yearly interest (12%)
to your account. (That's
12% of the amount in
your account.) |
What if we make
the same investment, but it's compounded semi-annually?
Compounded
semi-annually (twice a year)
means that, at the end of June, they add
6%
of the amount in your account... and at the
end of December, they add another
6%. |
Continued on the
next
page
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and distribution and/or downloading of these lessons is strictly
prohibited. |
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