Mint Finance Corner: Interested in Interest?
What is it about financial investment that scares you? Is it losing money? Is it trust in the system? Or could it be lack of education? More often than not, it is the education. Wall Street has done a great job of creating a new language, one that is exclusive to their club that leaves most people in the dark and at a loss. It is this loss that scares off most potential investors, because not only is it confusing, but also where do you even start? When is the right time to start? Well the best time to plant a tree was…YESTERDAY. Just like plants, investments grow over time and multiply, this is called compound interest.
Some of you may have heard about compound interest before in school and probably disregarded as soon as the class was finished, just like I did until I learned its importance. So let’s do a quick refresher of compound versus simple interest.
Clearly compound interest is the way to go, so how does this relate to Goal Planning? Well picture this, you have a goal to buy a house in 10 years, or want to have enough money to travel the world and take some time off in 5 years. Each month that goes by, is a month that you could have started compounding your money. The market works on compound interest not on simple interest. This is why it is so important to start early at a young age to set up your future, the longer your runway the better chances you have for taking off.
So let us start with educating ourselves, we do not need to live in fear of wall street, if we empower ourselves with the right tools then we will all be on our way to financial freedom. So remember simple interest=bad, compound interest=good. Learn it, love it, live by it!