Principle of Compounding
Welcome back to the second edition of the Finsnap News!!
Today, we are going to be talking about a very important concept that is a must know for people of all ages - the 8th wonder of the world -
THE PRINCIPLE OF COMPOUNDING!!
A financial chain reaction- Compounding
Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
Let’s understand the mathematics behind this moneymaking tool through this example:
This calculation shows that we have earned more than one fourth of our investment amount by merely keeping it aside for three years.
Ask Warren Buffett for the single most powerful factor behind his investing success, and he'd respond “compound interest” — without skipping a beat. ... Such is the remarkable power of compound interest, which Einstein called the eighth wonder of the world.
Now that we know about the power of compounding, we hope you have understood the importance of investing early.
Just imagine -- Invest Early and get more money at the end!!
Finsnap's 25th May, 2020 Update Jist:
Today's Topic: Principle of Compounding
Movie to catch up on: Wolf of Wall Street
Ted Talk to Watch: Kids Creating the Future Bank
Well that was it for this time folks! Hope it helps you become more financially mindful and aware of one of the most important principles of personal finance!
Incase you have any queries, feel free to reach back to us at
Until next time; Adios, Amigo!
Team Finsnap