Double Your Savings Using The Power Of Compound Interest

Additional Information

Simple And Compound Interest

Perhaps you have heard of the miracle of compounding. Innumerable investors have used it to their advantage to make their money grow faster than would be the case with simple interest. The great thing about compounding is that it doesn't require additional work on your part: you just sit back and watch your money grow. How's that for an investment strategy?

There are two basic types of interest: simple and compound. Simple interest is the amount of interest earned on the original amount of money invested. Simple interest is paid out as it is earned and does not become part of an account's interest-bearing balance. The invested amount is called principal. Let's say you invest $100 (the principal) at a yearly interest rate of 5 percent. Multiplying the principal by the interest rate gives you an interest payment of $5. This is your simple interest. The next year and each year thereafter, you will be paid $5 of interest on the principal of $100.

Setting Personal Financial Goals

If you do not know where you are going, how will you know when you get there? This is very true about financial goals. You need to set financial goals to help you make wise financial decisions, and also as a reward for your efforts. Goals should be clear, concise, detailed, and written down. Unwritten goals are just wishes. Those who set goals and fail will find that they didn't set realistic goals to begin with. So, the first step in setting any goal is to determine what is realistic and what is not. In this article, you will learn how to set realistic and achievable financial goals.

Using Deposit Accounts in Financial Planning

Although deposit accounts may not in themselves be high-yield investments, they can play a very important role in your overall financial planning.

To begin with, you will need to accumulate funds for investing. Many kinds of investment vehicles require minimum investments of thousands of dollars. Short of waiting for a windfall, the first step in your investment strategy may be to salt away a little at a time until you have the funds to invest. A deposit account offers a safe and ready way to do your salting. It can also be a good place to keep a supply of liquid cash on hand to take advantage of a "hot" investment opportunity.