How does compound interest actually work?
My bank account earns 0.5% interest and I have $2,000 in savings. Someone said compound interest is the 'eighth wonder of the world' but 0.5% seems pathetic. How does compounding make a real difference? Is there a rule for how long it takes to double your money? Should I put my savings somewhere else?
Sign in to message the asker.
I'm not a financial advisor but I've learned a lot from personal experience. The most important thing is to start early and be consistent. Even small amounts add up over time thanks to compound interest. Don't try to time the market.
3 Answers
I'm not a financial advisor but I've learned a lot from personal experience. The most important thing is to start early and be consistent. Even small amounts add up over time thanks to compound interest. Don't try to time the market.
Talk to a fee-only financial advisor, not one who earns commissions on products they sell you. The commission-based advisors have an incentive to recommend products that benefit them, not you. A fee-only advisor charges a flat rate.
My parents told me the same thing and they were right. But everyone's situation is different. Run the numbers for your specific situation before making a decision. There are good calculators online that account for all the variables.
This question is resolved and no longer accepting answers.