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The Amazing Power of Compound Interest

Compound interest is a wondrous phenomenon that absolutely must be harnessed as part of your wealth building plan.

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Have you stopped to really consider the power of compound interest and what it can do for your financial future?

I first shared the table below in 2009 and recently I’ve felt compelled to draw back your attention to it.

As I’ve shared before, my first job out of university was as a financial planner and one of the very first concepts drilled into me over and over was the power of compound interest and how it is the investor’s friend.

This is the single most effective illustration of the compound interet that I’ve ever seen, which continues to astound me even more than 30 years later.

If you started with a penny and doubled your money every day, how much would you have after 30 days?

Illustrating the power of compound interest

The following table lets you follow what happens to a penny after 30 days with the power of compound interest.

Period Balance Period Balance
Day 1 $0.01 Day 16 $327.68
Day 2 $0.02 Day 17 $655.36
Day 3 $0.04 Day 18 $1,310.72
Day 4 $0.08 Day 19 $2,621.44
Day 5 $0.16 Day 20 $5,242.88
Day 6 $0.32 Day 21 $10,485.76
Day 7 $0.64 Day 22 $20,971.52
Day 8 $1.28 Day 23 $41,943.04
Day 9 $2.56 Day 24 $83,886.08
Day 10 $5.12 Day 25 $167,772.16
Day 11 $10.24 Day 26 $335,544.32
Day 12 $20.48 Day 27 $671,088.64
Day 13 $40.96 Day 28 $1,342,177.28
Day 14 $81.92 Day 29 $2,684,354.56
Day 15 $163.84 Day 30 $5,368,709.12

The simple message to take from this illustration is that the sooner you start saving, the more your money can grow.

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How can you put the power of compounding interest to work in your financial plan?

While you’re not going to find an investment vehicle that lets you double your money every day, the power of compounding becomes more and more significant the longer you allow your money to grow.

So if you haven’t started yet, what are you waiting for?

About the Author Hugh Warren

An Intrinsic Coach® and enthusiastic student of personal development, I've been actively writing on a range of related topics for over 10 years. The range of topics I share has varied over time, but I try to pick ones that will hopefully strike a chord with you. You may or may not always enjoy everything I write, but if you appreciate the effort please make a point to share it with someone else.

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