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How can compound interest affect my savings over time?

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Over time, compound interest can really help your savings grow. That’s why it is so important to start saving and investing early!
 
What is compound interest?

Let’s say you put $1,000 in a savings account. Your money gets 3% interest. After one year, you will make $30 in interest. And you will still have your original $1,000, for a total of $1,030. During the second year, you are now making interest on $1,030 – your original deposit and the interest from year one.

In other words, you are earning interest on your interest. That’s compound interest. And it can make a big difference in how your money grows over a long period of time. In fact, if you invested $1,000 and earned 6% interest every year, your money would double in 12 years!
 
 
Tip: There is a simple formula you can use to see how fast your money will grow. It’s called the “Rule of 72.” Here’s how it works:
 
You just take the interest rate your money is earning, and divide it into 72. That’s how long it will take for your money to double. For example, 6 divided into 72 is 12. So with 6% interest, your money would double in 12 years. If you made 12% interest, your money would double in 6 years.
 
 
 


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