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Compound Interest is Magic!

The Power of Compound Interest

When I was in college, I learn a lot of things about financial especially when you want to invest your money and get your retirement as a wealthy person. Honestly, on that day I didn’t really understand the purpose of compound interest, however for now this thing is really awesome for me. The question is, WHY?

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound interest is standard in finance and economics (Wikipedia). So, imagine if I have IDR 100.000.000 in investment (deposit) and get annually interest rate 5%. In the next 10 years I will have IDR 162.889.463, it’s good, isn’t it?

Table 1

Let’s compare if I didn’t reinvest the interest, it will be look like this table below:

Table 2

The point of this compound interest is THE TIME. Is it okay for you to wait and doing nothing with your money?

I used to have a saving with compound interest at one of the Bank in Bali, BPR Lestari, and I was wrong because I withdrew my saving with compound interest in December 2019 to get my braces. I started this saving in 2017, with monthly investment only IDR 250.000 and in the next ten years I will have roughly IDR 40.000.000. But my milk already spilt, and I shouldn’t cry over the spilt milk so I decided in January to start over this saving with bigger amount, IDR 500.000.

It’s true we can’t just let out our money sit tightly without touch it. One of the blogs I have read before, it says we should free debt to start this investment because if we are not, we will end up lose our money to pay off the debt. Yeah, it makes sense to me. Or, one another way is we can just save it in small amount frequently and never touch and look how much we have. Sometimes we can’t defeat our desire.

My suggest for you is let’s start your investment RIGHT NOW!

Time is MONEY.