Compound interest can be your best friend or worst enemy.
On The Downside
On The Flip Side of Things...
Joe has RM10,000 cash. He puts it in a Fixed Deposit account with an interest rate of 4% for a year. He leaves the money untouched for 2 years.
>> Year 1 – RM10,000 + 4% = RM10,400. (Principal: RM10,000 + Interest Earned: RM400)
>> Year 2 - RM10,400 x 4% = RM10,816
In the second year, Joe is earning interest on the interest earned the year before. If Joe leaves the money untouched for 10 years, he would have accumulated RM14,802 - a 48% increase from his initial deposit of RM10,000!
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