Back
Karunakar CH
What You DO That Def... • 3m
"The best way to predict the future is to create it." – Peter Drucker Today, we’ll focus on Finance Concepts. Concept of the Day: Compound Interest Compound interest is a fundamental finance concept that builds wealth over time. Let’s explore it in a story format. Story: The Tale of Two Investors Once upon a time in a village, there were two friends, Ravi and Kiran. Both decided to start saving for their futures at the age of 20. Ravi saved ₹10,000 every year in a simple savings account that earned 5% simple interest. Kiran, on the other hand, found a smart investment plan offering 5% compound interest. Ravi’s Path: Ravi earned interest only on his initial amount. By the time he turned 30, he had saved ₹1,00,000 (₹10,000 × 10 years). His interest totaled ₹50,000, giving him ₹1,50,000 in his account. Kiran’s Path: Kiran reinvested the interest she earned each year, so her money grew exponentially. Over 10 years, her account grew to ₹1,62,889, even though she also started with ₹1,00,000. By the time they reached 50, Ravi’s account had grown to ₹2,00,000, while Kiran’s account ballooned to ₹6,72,750. Kiran’s wealth multiplied faster, all thanks to compounding! Key Takeaways Compound Interest Formula: A=P(1+r/n)^nt Where: A = Future Value P = Principal Amount r = Annual Interest Rate (in decimal form) n = Number of Times Interest is Compounded per Year t = Time (in years) The earlier you start investing, the more time your money has to grow exponentially. Compound interest works best when you reinvest your earnings and think long-term.
Replies (2)
More like this
Recommendations from Medial
Download the medial app to read full posts, comements and news.