Compound Interest

8th Wonder of World...

Posted by Harsh on May 07, 2020 · 4 mins read
"The strongest force in the universe is Compound Interest" - Albert Einstein

Now, We have decided our smart goals and start saving money to achieve financial independence, But without compounding nothing can be achievable in financial world. Compounding leads your money to works for you instead of you works for money, So let's checkout how compounding works.

Suppose you have invested 3,00,000 rupee in fixed deposit at intrest rate of 8% what will be the value after 10 years ? We will calculate the return by comparing compound interest vs simple interest.

Compound Interest

You can download the excel file from here. As we can see from table as more time passes more chances we give our money to compounded.

Now, you might have a question can I stop parking my money into saving account and start investing in FD? That's not the case we should never park all our money into a single instrument. We will check the various investment option and risk associated with the upcoming chapters.

Rule of 72

If Someone should ask you at the 8% interest rate in how much time my money will be double? You might take some time to answer this question but this will be easily answerable with the rule of 72.

Divide the 72 by rate of interest (8%) to calculate in how much time your money will be double, Checkout the previous compounding table to identify calculation.

72 / 8 = 9 Years

With the help of this rule, we can identify the time horizon for money to duplicate itself in investing so we can plan our investment accordingly.

Now, that we have learned the basics of financial independence like How money works ? What should be our goals? How to save money? this all concepts are just like book theories. Now, We will deep dive into practical things like various investment options in the market, insurance Planning, tax saving options in coming blogs up to that keep reading some below mentioned books to understand the financial theories and "STAY HOME STAY SAFE".✌️😀

Books for Financial Planning for Beginners: -

- Rich Dad Poor Dad
- The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
- The Richest Man in Babylon
- The One - Page Financial Plan

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