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What Is Compound Interest And How Does It Work?

It's no secret that your financial success lies in your knowledge about the movement and growth of money. We have all made bad financial decisions that have hindered our success, it's high time that we educate each other and change our behaviors around money. In this article we are going to explain how you can make use of compound interest to grow your money.


What is compound interest?

In simple terms it refers to interest that is added to the principal amount that you've invested. Let's take for example you decide to invest R10 today. Based on the rates that are offered by the bank your money grows by R5 every month. The more interest you get over time, the bigger your initial investment gets and this eventually leads to exponential growth.

1.Saving your money

This is the most simple and safest method that you can use to take advantage of compound interest. All you need to do is to open a savings account and contribute money to it.

— When doing so, make sure that you shop around for the best interest rates. Even though they won't be the same when compared to investing in shares - it's better than nothing.

— You must atleast commit with a bank that will offer you 10% interest every month. Do your own research and see which one is good for you.

— Consistency is key. I would recommend that you come up with a figure that you will be comfortable with and this can only be done by devising a budget.

— How much can you afford to contribute to your savings account? This is the most important question that you must ask yourself.

2.Dividend yielding stocks

By investing your money in shares that you hope will grow in value over time, you are not only setting yourself up for success but also making use of the power of compound interest.

— To get started you need a broker platform.

— Educate yourself about the workings of this industry. There's a lot that you can learn from YouTube videos, books and online course.

— Start small while thinking big. Don't put all your eggs in one basket. Think in terms of future growth than instant gratification.

We hope you have found this article informative. Which investment stands out for you? Let us know in the comments section below, we'd love to hear from. For more informative articles like this one published daily, please follow us and be part of our awesome community. 

Content created and supplied by: ShakersAndMovers (via Opera News )


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