- Talk about what compound interest is and how it helps your money grow. Use examples and calculators to show how it works.
- In the example below, Ted and Mary are saving money for retirement. Ted saves $2,000 each year beginning from age 18 to 27 in an account paying 7% APY. Overall, he saves $20,000 in ten years. Mary begins saving at age 35 and also saves $2,000 each year until age 65. She saved $70,000 in 30 years. However, because of compound interest, and despite Mary saving an additional $50,000, Ted has over $90,000 more than Mary!
*APY=Annual Percentage Yield.
Investments are assumed to be made annually and at the beginning of the investment period. Balance amounts are rounded to the nearest dollar and are not adjusted for inflation.