bizpower.fun

Albert Einstein reportedly called compound interest the eighth wonder of the world—and for good reason. It’s one of the most powerful tools in investing, especially when you start early.

So what is it?
Compound interest is when your investments earn returns not only on the original amount you invested but also on the returns you’ve previously earned. In short: you earn interest on interest.

Let’s say you invest $1,000 with a 7% annual return. After one year, you have $1,070. In year two, you earn 7% not just on $1,000—but on $1,070—giving you $1,145. By year ten, that $1,000 grows to nearly $2,000. By year 30? Over $7,600. All without adding anything extra.

The key is time. The longer you let your investments grow, the more compounding works in your favor. That’s why financial advisors always say: start investing as early as possible, even if it’s with small amounts.

To maximize compounding:

• Reinvest dividends instead of cashing them out.
• Use tax-advantaged accounts (like RRSPs, TFSAs, or IRAs) to avoid erosion from taxes.
• Automate regular contributions.
• Stay invested—time in the market beats timing the market.

Compound interest rewards patience. It turns modest, consistent investments into significant wealth over time. Whether you’re saving for retirement, a home, or your kids’ education, let compounding be your silent partner in success.