Learning about Compound Interest

Compound interest is your long term friend! Once you start making money you will want to open a savings account at a bank. The bank will then give you interest based on the amount of money you deposited. This interest is a percentage paid annually.

Now it is tempting to take the additional money made in interest and spend it, but when you know about compound interest, you will learn that it is reinvesting the interest, rather than paying it out.

For Example: If you deposit $1,000 in your savings account that pays 1 percent annual interest, you would get $10 interest after a year. Now compound interest is giving you interest on $1000 plus the $10 which you earned as the interest on the original amount. And so it continues growing over a long period of time.