Compound Interest - The Most Powerful Force
|
Posted By: Dezmon Landers on July 29, 2008 Believe it or not Albert Einstein is quoted as saying “The most powerful force in the universe is compound interest”. If he said that, you know there is something very powerful about the power of compounding… Have you ever wondered how the rich stay rich? They use many financial methods that are commonly known and others that are reserved only for the world’s wealthiest individuals and families. One powerful method that us common folk can take advantage of is making millionaires everyday – compound interest. Before we get into the meaning and power of compound interest, we must know what interest itself is. Quite simply, interest is the cost of borrowing money. Many of us know all too well how interest can work against us, whether that’s paying monthly payments on a loan, credit card or borrowing some cash from a financially savvy friend. When interest works against you, you are borrowing money from a bank or some other financial institution. When interest is working for you, you are letting a financial institution borrow your money and they are paying for the opportunity to do that. Now that you have an understanding of the basic concept of interest, let’s compare simple interest vs. compound interest. Simple interest enables you to earn interest off of the principal (the initial amount you let someone borrow). An example is below: Equation: Principal x Rate x Time Savings Account: $1000 Interest: 2.5% Savings Account Balance (After 10 years): $1,800 Compound interest enables you to earn interest off of the principal and interest. An example is below: Equation: Principal x (1 + annual interest rate) n (number of years compounded) Savings Account: $1000 Interest: 8% Savings Account Balance (After 10 years): $2,159 As you can see, the power of compound interest makes your money work for you. You can use this comparison across any investment vehicle you choose (checking, savings account, mutual fund, etc…). You may be wondering where you can get an 8% interest rate, well I can definitely tell you where it won’t be and that’s in any standard checking/savings account through your local bank. Normally, high interest bearing accounts can be found through mutual funds. A mutual fund is a pool of money that is comprised of a lot of everyday people’s money and its purpose is to invest in companies in the market. They are able to get higher returns because they are so diversified, normally staying on par with market returns (on average 8-10%). I recommend opening a mutual fund/money market account with Sharebuilder or Fidelity. For those of you not fully ready to take the plunge into the world of stocks, bonds and mutual funds, I recommend you opening a Washington Mutual savings account. They are currently offering a 3.30% interest rate. If you want to become a millionaire, you’ve got to think like the rich do and let your money work for you…Mo money, Mo money, Mo money! If you enjoyed this article, Join HBCU CONNECT today for similar content and opportunities via email! |
 |
Dezmon Landers
From Columbus, OH Member Since June 2005 |
Comments
|
In regards to the savings account, it is one of the highest paying on the market. Could you elaborate on your family corp. investment?
Tuesday, July 29th 2008 at 9:47PM |
 |
Fascinating. More of us should know this information. You are doing a great service.
Monday, August 4th 2008 at 5:25PM |
 |
This is a great primer. We don’t do enough teaching one another about important matters like money and fiancé. The average person in our community only begins to learn about this when they get ready to do big things like buy a car or house and they realize that their finances are in bad shape. Thank you for sharing this very useful information.
Wednesday, August 6th 2008 at 8:49AM |
 |
Great info Dezmon! I agree with Will - we don't learn this stuff until too late many times. I sometimes wonder how big my reserve would have been had I learned and used principles such as this from an earlier age.
Wednesday, August 6th 2008 at 12:09PM |
 |
Great post! Very detailed and informative. I'm definitely going to be looking further into this
Friday, August 8th 2008 at 8:41PM |
More From This Author
Latest Blogs
 |
Volunteer Join us in creating an uplifting and unforgettable event that champions a more inclusive world!Minnesota now that's a place I've yet to venture to.
Better add some Community Service activities to our Family Calendar
Special Olympics is near and dear to our staff at HBCUConnect
Represent fo ...more
How May I Help You NC • 68 Views • April 23rd, 2026 |
 |
21 Questions to ask a new Mate *What does DEPRESSION look like on you*Made in love Made in Lust
What causes an impediment in a fetus in a newborn in a adolescent in adults
Or could it the impediment be another color in the Human Rainbow just another part of he he ...more
How May I Help You NC • 76 Views • April 23rd, 2026 |
 |
EARTH DAY SERVE UNIVERSE NIGHTSprinkled Dipped 🍒 on top in Earth DAY NOON NIGHT festivities
...more
How May I Help You NC • 90 Views • April 23rd, 2026 |
 |
Best kept secret in IndiaODISHA formerly known as Orissa
Get that Juggernaut Origin History
See how sports are weighing yay nay
MAY Soccer Finals https://www.newsx.com/live-updates/kerala-blasters-vs-odisha-fc-isl-highlig ...more
How May I Help You NC • 82 Views • April 23rd, 2026 |
 |
What type of blinged out cup would we gift to our GraduateIs it a Disney Theme with some Bling
Should the cup represent his beloved Mexican Soccer team
Maybe a blinged out cup with a custom reason why they were created
Made In Lova ...more
How May I Help You NC • 83 Views • April 23rd, 2026 |
Popular Blogs
 |
Divorce in America in 2009 – What’s love got to do, got to do with it?
Join Brother Marcus and the cast and the crew of the Brother Marcus Show live this Sunday evening on February 1, 2009 @ 8:00 p.m. for another hot topic in our community! “Divorce in America in 2009 ...more
Brother Marcus! • 70,960,169 Views • January 27th, 2009 |
 |
VISINE ALERT!!!Seemingly innocent medication such as Visine eyedrops are used by people to concoct a mixture with similar effects as a date-rape drug.
When mixed with alcohol and taken orally, the eyedrops can l ...more
Siebra Muhammad • 119,334 Views • May 23rd, 2009 |
 |
"Chain Hang Low" check out the real meaning of the Lyrics!Recently there is a new artist out of Saint Louis that goes by the name JIBBS. Jibbs debut single "Chain hang low" has a history that most people are not aware of. The particular nursery rhyme that th ...more
Tyhesha Judge-Fogle • 77,427 Views • November 9th, 2006 |
 |
HBCU Marketplace Gifts: Divine 9 Premium Fraternity / Sorority Playing CardsVendor: Charles Jones
Item Price: $20.00
Price Includes Shipping: Yes - Shipping Included
Item Description:
Pantheon Series - Divine 9 - Premium Playing Cards (choose Gold Series or Silve ...more
How May I Help You NC • 62,568 Views • December 2nd, 2018 |
