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The Power of Compound Interest shows how you can really put your money to work and watch it grow. When you earn interest on savings, that interest then earns interest on itself and this amount is compounded monthly. The higher the interest, the more your money grows! If you saved $200 each month, after 35 years, your money would have only grown to $148,680 at a three percent interest rate. At a six percent interest rate, it would have grown to $286,370. If you received a 12 percent interest rate on your savings, your money would have grown to $1.3 million! The sooner you start to save, the greater the benefit of compound interest.
This example is hypothetical and does not represent an actual investment. This uses a nominal 9% rate of return, compounded monthly. It uses a constant rate of return, unlike actual investments, which will fluctuate in value. It does not include fees and taxes, which will lower results.
Do you know the Rule of 72? It’s an easy way to calculate just how long it’s going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double. As you can see, a one-time contribution of $10,000 doubles six more times at 12 percent than at 3 percent.
HOW MONEY WORKS™ Want to save $1 million by age 67? You'd better get started soon. The longer you wait, the more you'll have to put away each month to reach your retirement goals. 27 years old? You have to put away $214 a month to reach $1 million. Start at age 37, and you're putting away $541 a month to reach your goal. Begin at age 47, and you'd have to put away $1,491 a month. Wait until age 57, and you're putting away a hefty $5,168 a month. Wait until the last minute (age 62) and you'd have to stash $13,258 a month to reach $1 million by age 67. So, the sooner you start saving, the fewer dollars you'll have to put away each month to reach your retirement goals. Don't pay the high cost of waiting! This example is hypothetical and does not represent an actual investment. This uses a nominal 9% rate of return, compounded monthly. It uses a constant rate of return, unlike actual investments, which will fluctuate in value. It does not include fees and taxes, which will lower results.