ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Interest earned on the principal investment
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Any form of interest earned from saving or investing
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Earning interest on interest
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The effect interest has on the total return on investment
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Detailed explanation-1: -Compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on your original principal. Compounding can create a snowball effect, as the original investments plus the income earned from those investments grow together.
Detailed explanation-2: -If you’re a beginning investor and want to start taking advantage of compound interest right away with as little risk as possible, savings vehicles such as CDs and savings accounts are the way to go. CDs are instruments issued by banks that require a minimum deposit and pay you interest at regular intervals.
Detailed explanation-3: -Compound interest causes your wealth to grow faster. It makes a sum of money grow at a faster rate than simple interest because you will earn returns on the money you invest, as well as on returns at the end of every compounding period. This means that you don’t have to put away as much money to reach your goals!
Detailed explanation-4: -Focus on savings in the first 10 years. When you’re younger, it’s not so much about the type of investments you hold but more about just diligently saving. Be patient. Don’t forget to invest in yourself. 13-Jan-2017