Comments on: BVC #21: True Power of Compound Interest

By: FlyFisher

FlyFisher — Tue, 21 Sep 2010 03:39:28 +0000

“If a person has a true and deep understanding of what compound interest is they are well on their way to becoming wealthy.” Well put Arabic Student. Saving that little bit is such a hard thing to do when money is tight, and it is even harder to keep it in there!

By: David

David — Fri, 08 Jan 2010 16:26:13 +0000

An interesting fact about compound interest is if you keep increasing $10,000 by 10 percent every year then you will have about $1,000,000 after 46 years.

By: Chris

Chris — Mon, 28 Dec 2009 22:37:01 +0000

Ah it is good to be John….Joe not so much.

By: Chris

Chris — Mon, 28 Dec 2009 22:35:19 +0000

There are still a lot of good rates out there. You just have to be resourceful and keep your money on the move.

By: Wilma

Wilma — Mon, 09 Nov 2009 20:12:48 +0000

Good video and now I feel guilty. I never looked at it from that angle before. Now I’m going to have to win the lottery or get an inheritance from a long lost relative to catch up. =)

By: Joyce

Joyce — Wed, 04 Nov 2009 20:36:44 +0000

Jim, that is really not funny. You guys always go on about compound interest, but it just doesn’t come out to anything much with todays .001% interest, if you are lucky, that savings accounts give out.

By: Minority Fortune

Minority Fortune — Wed, 28 Oct 2009 23:33:15 +0000

I agree that the video quality is perfectly fine and already of the typical video post one would usually see.

I love the perspective you provide on delaying your savings/investments for a year or more. You lose out on that year plus the years of compounded interest you would have earned on it. It’s a wonderful thing indeed!

By: Damon Day

Damon Day — Thu, 22 Oct 2009 14:37:23 +0000

I couldn’t agree with you more Jim. I always tell my clients that it is much easier to save their way to wealth than it is to earn their way to it. That is simply because of the power of compound interest. Anyone with an average salary can amass quite a bit of wealth over a lifetime of working if they just put some money away every month, live within their means and stay out of consumer debt. This is why carrying balances on credit cards is one of the single biggest wealth destroyers out there. Most people don’t realize the opportunity costs of buying things on credit. Get out of debt as fast as you can, and then add those minimum payments you were making to your 401K or other investment vehicle and start building your nest egg rather than your bankers.

By: The Arabic Student

The Arabic Student — Thu, 22 Oct 2009 02:29:45 +0000

Compound interest really is amazing. Albert Einstein is rumored to have declared it “the most powerful force in the universe”.

If a person has a true and deep understanding of what compound interest is they are well on their way to becoming wealthy. Someone who really understands compound interest would never carry a balance on a credit card and would never have money in an account that gained 0% interest (you’re giving the bank a loan for free).

I remember watching an interview with Warren Buffet where he said that he was outraged when his wife bought $5000 worth of furniture (this was after he was already a billionaire). He said something like, “Don’t you realize how much $5000 is in 20 years at 5% interest?” He didn’t think of the money in terms of its current value, but what it would be in the future. If you have that mindset and act on it then you will become wealthy.

By: Evolution Of Wealth

Evolution Of Wealth — Wed, 21 Oct 2009 16:31:53 +0000

Thanks for a great post Jim. I don’t think anyone can argue with the power of compound interest. I actually just wrote a similiar post about compound interest looking at it from a little different perspective. It’s title, “It’s Just 3 years” http://evolutionofwealth.com/2009/10/20/its-just-3-years/
I would love to hear what you think.

By: Script pls?

Script pls? — Wed, 21 Oct 2009 13:16:59 +0000

Got it – it’s very clear, thank you. Wow. Now I’m really motivated to move the excess out of my non-interest-bearing checking account. Thanks, Jim!

By: Jim

Jim — Wed, 21 Oct 2009 12:44:44 +0000

How about if I just explain the video, rather than give a script? Compound interest is powerful because as your savings accrue interest, the interest is added to the savings amount and it too will earn more interest. The point of the video was that if you delay just one year (or day, really), it doesn’t cost you a day’s or year’s worth of interest, it will cost you forty years. Or thirty years. Or however long your savings period is. The math on the board simply illustrates that using two examples of people saving $100 a month. John starts one year earlier and has forty years of savings, Joe only has 39.

After forty years, JOhn has $199,149 in savings while Joe has only $186,417. That makes sense because John has contributed an extra $1,200 and saved one year longer. The difference between the two is ten times the $1,200 savings difference because of forty years of interest. Even if you let Joe catch up and John stops saving, he’s still ahead by a good $12,000 after an additional year.

By: Script pls?

Script pls? — Wed, 21 Oct 2009 11:59:42 +0000

I know “compound interest” is good and I’d like to really understand how it works. Thing is, I’m deaf and I don’t understand what you’re saying on your video. Is there any chance you have a script to go with that video?

Thanks – love the site!

By: Greg

Greg — Wed, 21 Oct 2009 02:25:06 +0000

Great post, and timely. I was lecturing a co-worker yesterday about this very subject. Needless to say I have forwarded a link to him.

Word of mouth is a powerful thing!

Thanks, and keep up the great work!

By: zapeta

zapeta — Wed, 21 Oct 2009 00:15:44 +0000

Thanks Jim, enjoyed the video!

I had a Roth IRA open when I was 18 but I didn’t contribute to it regularly. I wish I would have! I can only imagine how much money I left on the table…