Finances are important, but they can get complicated, and it's easy to get frustrated with all the math and feel like giving up! Considering my recent posts about RESPs, today I want to explain some things about compound interest. If you're not familiar with compound interest or how it works then this post is for you! I'm going to tell you what it is, show you how it works, and demonstrate why it makes a big difference to your investment if you start saving as soon as possible!
What Is Compound Interest?
Simply stated, compound interest means that your interest earns interest. By investing early, you could get a lot more return for the money you invest when you start (your principal investment) than you would with non-compound interest (this is called simple interest).
A Visual Example
To help you see how this works, I've put together a chart for you that shows the difference between an investment with compound interest, compared to an investment with simple interest: