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Episode 14: What is Compound Interest?
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Summary
Compound interest is interest on a deposit that is calculated based on both the initial principle and the accumulated interest from previous periods. It is interest on interest, which helps money grow faster than simple interest. Compound interest can be earned in savings accounts, higher yield savings accounts, CDs, and investment accounts like stocks, bonds, and mutual funds. Retirement accounts like 401ks and IRAs can benefit from compound interest over time. It is important to be patient and not touch retirement accounts to let the power of compound interest work.
Keywords
compound interest, savings accounts, higher yield savings accounts, CDs, investment accounts, stocks, bonds, mutual funds, retirement accounts, 401ks, IRAs, patience
Takeaways
- Compound interest is interest on interest, which helps money grow faster than simple interest.
- Compound interest can be earned in savings accounts, higher yield savings accounts, CDs, and investment accounts like stocks, bonds, and mutual funds.
- Retirement accounts like 401ks and IRAs can benefit from compound interest over time.
- It is important to be patient and not touch retirement accounts to let the power of compound interest work.
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