Before we go deeply about law of compounding interest, let us trace back its origin. Many had said that it could be trace back in the ancient times of the trading transaction of the Sumerians way back 3000 BC. There are recorded numbers on their tablet that somehow depict multiplication of money. It was also noted that there are some records that the Israel had started it - (I just searched it on the forum that I had visited).
Nonetheless, we can't change the past, but we could study more about compounding interest and how can give you fortune or can ruin your life. Let's first talk about compounding interest as your friend. I have read financial books like "Till Debt Do Us Part" and "Pera mo Palaguin mo" and the interesting part here is that banks offer compounding interest in your money. It is in the form of time deposits. Time deposit is letting your money stay in the bank earning much higher interest than just letting it sit on your bank as a savings account. Each banks have different interest rate and its up to you to discover it. But there are other kinds of other means that could grow your fortune using compounding interest and you may talk to a teller who could give you an advice on your money. And to have an idea when your money will double, we may use the "RULE OF 72". Rule of 72 is a kind of estimation formula do discover a roughly accurate time frame when does your money will double. The formula is seventy-two divided to the interest rate that was offered by a certain bank or institution that would be equalled to the time when will your money will be doubled.
Example: Your bank said that your money will be put into 12% rate. Given these rate:
72 / 12 = ?
? = 6 , so it means that in 6 years time, your money will be doubled.
(you could try your current interest rate of your money in the bank now.)
So we have an overview how the compound interest rate will work at your buddy but now its time to know that compound interest could also be your worst enemy that can destroy you gradually. The compounding interest that I am talking about is the interest rate that yields in your credit cards. The interest rate of a credit cards is much higher than your debit card (savings in the bank). This is how the bank earns aside from the fact that it also borrows your savings in the bank to the people who loans and own a credit card. I am not a credit card user (but I am not planning UNLESS we are in the USA or other foreign countries that has a system that prefers to pay using card).
Imagine, how much does a bank give on our savings in the bank? 2% or 3% per annum. Now how much interest does a credit card company charge a credit card user? 3.5% per month? Looks fair? Of course not, your interest rate in your credit card is estimatedly yields 40% interest per annum. That is why many people using the credit card only pays the minimum (for the reason that they can't pay the whole amount - well in the first place they had gotten they item that they can't afford in the first place ) and does not pay the whole amount of their credits.
These are only information, and like what we do in life, we are the one who is incharge.
How about you? Are you making friends with compounding interest? or it is your worst enemy?
It is up to you now, again, these are only facts and you! - as a human being - have the power to take control your life and enjoy the fullest of life - living with a peaceful life and with a secured feeling.
Nonetheless, we can't change the past, but we could study more about compounding interest and how can give you fortune or can ruin your life. Let's first talk about compounding interest as your friend. I have read financial books like "Till Debt Do Us Part" and "Pera mo Palaguin mo" and the interesting part here is that banks offer compounding interest in your money. It is in the form of time deposits. Time deposit is letting your money stay in the bank earning much higher interest than just letting it sit on your bank as a savings account. Each banks have different interest rate and its up to you to discover it. But there are other kinds of other means that could grow your fortune using compounding interest and you may talk to a teller who could give you an advice on your money. And to have an idea when your money will double, we may use the "RULE OF 72". Rule of 72 is a kind of estimation formula do discover a roughly accurate time frame when does your money will double. The formula is seventy-two divided to the interest rate that was offered by a certain bank or institution that would be equalled to the time when will your money will be doubled.
72 / 12 = ?
? = 6 , so it means that in 6 years time, your money will be doubled.
(you could try your current interest rate of your money in the bank now.)
So we have an overview how the compound interest rate will work at your buddy but now its time to know that compound interest could also be your worst enemy that can destroy you gradually. The compounding interest that I am talking about is the interest rate that yields in your credit cards. The interest rate of a credit cards is much higher than your debit card (savings in the bank). This is how the bank earns aside from the fact that it also borrows your savings in the bank to the people who loans and own a credit card. I am not a credit card user (but I am not planning UNLESS we are in the USA or other foreign countries that has a system that prefers to pay using card).
Imagine, how much does a bank give on our savings in the bank? 2% or 3% per annum. Now how much interest does a credit card company charge a credit card user? 3.5% per month? Looks fair? Of course not, your interest rate in your credit card is estimatedly yields 40% interest per annum. That is why many people using the credit card only pays the minimum (for the reason that they can't pay the whole amount - well in the first place they had gotten they item that they can't afford in the first place ) and does not pay the whole amount of their credits.
These are only information, and like what we do in life, we are the one who is incharge.
How about you? Are you making friends with compounding interest? or it is your worst enemy?
It is up to you now, again, these are only facts and you! - as a human being - have the power to take control your life and enjoy the fullest of life - living with a peaceful life and with a secured feeling.
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