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Compounding Interest - It can Make You or Break You The Power of Compounding Interest can make you very wealthy or very poor - its mostly up to you!Compounding Interest - Working Against You Interest payments that must be made on credit cards, loans and even mortgages are costly. They can double and triple the actual amount of the loan at times. It is smart shopping to compare the loans that are out there to get the lowest rates that are available. Take a look at these examples. On a home that is purchased at $200,000, for a term of 30 years at an interest rate of 7%, an individual will actually pay $279,017.80 in just interest alone! Dont forget to add to that the actual $200,000 that the home cost. When compared to other loans that are out there, the same $200,000 home at a term of 30 years at just 6% will cost a total of $231676.38 instead. That is a large difference in just interest for the same loan. Securing the lowest costing option is essential, as you can see. The same goes for credit cards. $6000 worth of credit card debt monthly that has an interest rate of 15% will take over 20 years to pay off at a cost of well over another $5000 on top of the principal. Compounding Interest - Working For You On the other side of the coin, there is interest as a benefit to you. By allowing interest to compound month after month, an individual can make a great deal of money. There are various products that can be invested in with various interest rates. Here, you are looking for the balance between the risk of the investment and the interest rate that can be provided to you.
Also, another way to benefit is through a retirement or savings plan through your employer. Some will even match what you put in. This is ideal as these allow you to save without dealing with tax yet. It can be easy to do as well because you will not really know that it is not there. Your goal for savings should be a mere $5 to $10 per day. Adding that to interest that is compounded over and over means that you will save thousands of dollars. The sooner you start the better. This is a number that youll love: Saving $10 per day, ($300 monthly) for 25 years, at a rate of 6.5% will yield you $50,520.95 after ten years and after 25 years will bring you 224,650.96! Well worth the investment! In the Long Run... In the long run it is all about finding the balance between good interest and bad interest. Funding your future is essential, so saving money and building wealth are the keys. Save money and find the lowest interest rates on products you need (mortgages, car loans, etc.) and at the same time save money and watch it grow! Use the miracle of compounding interest to your advantage.
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Personal Money Management Basics
49% of adults, and 66% of US high school students got F's on a national test on their knowledge of basic economic principles.
"I'd rather go to bed without supper than rise in debt."
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The best way to get the most out of interest
rates on such things as savings accounts is to take the time to
pay yourself first. To do this, establish a savings plan in
which the funds from your paycheck automatically go into the
fund. Have an electronic deposit made into the fund right from
your checking account on the day it is deposited. This will
allow you to never notice that it is not there. 
