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What is compound interest, and why is it important?

Compound interest is often called the "8th wonder of the world". It’s the process of earning interest on both your initial investment and the interest that accumulates over time.

How It Works

Let’s say you invest $1,000 at a 10% annual interest rate:

• Year 1: You earn $100 in interest → Total = $1,100

• Year 2: You earn 10% on $1,100 → Interest = $110 → Total = $1,210

• Year 10: Your money has grown to $2,593—without adding another dime!

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Why It’s Important

Growth upon Growth Accelerates Wealth Development – The earlier you start, the more time your money has to compound.
Works for You (Not Against You) – While compound interest grows investments, it also makes debt (like credit cards) more expensive.  Fees can also compound against you so watch them closely as well!
Key to Retirement Planning – Small, consistent investments can turn into millions over decades.

In below’s example, $10,000 is not a small sum to start with but if you can spare $500 after that, monthly for 20 years, it can become a significant sum.

This should also encourage you to identify a larger amount so you can build your current assets to an amount that will help support you later in life. Before you consider upgrading your truck, a new house, boat, vacation or other lifestyle expenditure, be sure you are aware of the value dollars held today are worth and how you are trading’s convenience and pleasure for tomorrow’s flexibility or security.

The best time to start investing was yesterday. The second-best time is today! The longer your money compounds, the less you have to invest out-of-pocket to reach financial freedom.