When Would You Use Compound Interest?

Today's going to be a little bit of a shorter show and it's going to be a solo. A couple of episodes ago. One of my guests, Robert Shulz we briefly talked about. Compounding interests. Now I want to revisit that. Talk about that a little bit more. So the parents out there can fully understand how important this could be to their child when just starting off in life now to quote Albert Einstein, he who understands it, earns it. He who does it. Pays it.


In This Episode:
 [00:01:34] -Simple interest

[00:03:00] - Compound interest

[00:04:23] - Time, compound interest best friend

[00:05:17] - Where can you find compound interest?

[00:09:47] - Starting early

Links Mentioned:

• M1 finance: https://m1.finance/vOvlRgEue1FK
• Blockfi: https://blockfi.com/?ref=35ea4597
• Celsius network: https://celsiusnetwork.app.link/197418b27f
• Like us on Facebook: https://www.facebook.com/RaisingFinancialFreedom
•  Like us on Twitter: https://twitter.com/RF_Freedom

 Disclaimer:This post contains affiliate links. If you make a purchase I may receive a commission at no extra cost to you. 

Transcript

[00:00:00] Eric: [00:00:00] Hello? Hello. Hello parents out there. Today's going to be a little bit of a shorter show and it's going to be a solo. A couple of episodes ago. One of my guests, Robert Shulz we briefly talked about. Compounding interests. Now I want to revisit that. Talk about that a little bit more. So the parents out there can fully understand how important this could be to their child when just starting off in life now to quote Albert Einstein, he who understands it, earns it.

[00:00:34] He who does it. Pays it. So that is very important. So let's unpack this in. 

[00:00:43] Host Daughter: [00:00:43] Come on, dad, stop playing around and play the music. 

[00:00:46] Eric: [00:00:46] Geesh tough crowd.

[00:00:53] Introducer: [00:00:53] Have you ever wondered why some people seem to have it all financially do well off parents simply hand their children. [00:01:00] Or is there more to this welfare? Welcome to raising financial freedom. The podcast, we are here to talk about everything. You never knew. Teacher children, when it comes to starting their financial future, the principles behind wealth and methods that are out there to teach your child.

[00:01:15] Personal financial freedom. There was no real trick to earning other than money. We are here to discuss, teach and grow with you. Raising financial freedom, the podcast with your host and concern parents, Eric yard, let us get right into today's show.

[00:01:34] Eric: [00:01:34] So now I'm going to talk about two different types of interests in this show. When it comes to receiving money, one will be simple interest. The other will be compounding. Now simple interest is pretty much cut and dry. If you had $10,000. And you had 5% interest, I would say on that you would make in your first year, $500.

[00:01:58] And then each year after [00:02:00] that it'll be the same $500 you'll be making on that same $10,000 that you initially put in. So, yeah. Um, I hate to say, but it's pretty simple where you can find the simple interest. Well, mostly a whole mortgages. Auto loans and student loans. And also if you lent out your money, so as a personal loan, you probably will get it back in, um, in simple interests, they all platforms for that, where you can lend out your money as a personal loan, but I will do my research on it.

[00:02:35] And everything said here is for education and entertainment purposes. And as a matter of my personal opinion, But yeah, there is definitely platforms where you can go on and lend out your money for a certain amount of interest. So, yeah, take a look into that. So once again, year after, year on your principal with simple interests, you'll get back the same thing year after year [00:03:00] after year.

[00:03:00] That's enough about simple interest, less talk about what I really want to talk about, which is compounding interests. So now using the same numbers I used before, which was $10,000 at 5%. So once again, on your very first year, you would make $10,500 on the second year. The interest is going to start to compound.

[00:03:25] And now your new total after the year two will be $11,025. Then after year three, you would have earned $11,576 and 25 cents. Now, if you want to see how far that can really go, go on the internet and look up compound interest calculator, and you could put in those numbers and go as far as 10, 20 years, if you need, when you think about it, now, this is just off of a initial deposit of [00:04:00] $10,000 pitcher.

[00:04:01] Now you kept adding on to that $10,000 while it was growing. Once again, do the math and you would see what I'm saying. Now there's one thing that works well with compound interest. And that is like the peanut butter to jelly cereal to milk, or like ham and cheese. But you pretty much get the gist. That thing is time.

[00:04:23] Yes. Time. This is why I'm stressing for parents to teach this to their child. Because the younger, you start working with compound interests, the more you will have at the end of the road point blank. Now, if someone had told me this, when I was 16, 17, I would have did the numbers. And I would have been like, whoa, hold on.

[00:04:47] I would have specifically target assets that gave me compound interest and methods. Also, they gave me compound interest. But I knew nothing of it at that time of my life. So to [00:05:00] think of what I've could have grown. Yeah. At an early age is kind of crazy, but I didn't, and this is why we are here talking about it so that my child and your child can start early and start building wealth at a young age.

[00:05:17] So, where can you find compound interest? One place is at the bank in your savings account. Now that would be a good place once upon a time when they were giving five to maybe 8% for your savings account. But today you already know what you're getting for your savings account. You get a percentage of.

[00:05:39] 0.01%. I wonder how long that would take to grow a yea, but yeah, that's one place is the bank. Another place is your money market account, which, uh, average you're going to get up. 0.1% and then another [00:06:00] place also will be a certificate of deposit where you could get probably 1% on average for putting money into that.

[00:06:09] So you, as you can see, these percentages are quite low and take forever to build wealth. So me personally, I'm not doing that now, if you want to chuckle do the math and see how long it was. For you to double your money at those percentages. I mean, it's ridiculous, but on a side note, parts of Europe actually practice negative interest rates at their banks.

[00:06:39] So when you keep your money in the bank, you actually are losing money, which is really crazy. That means you're paying the bank in order to keep your money in the bank. No. Whether or not this reaches the U us. I doubt it, but I can only hope that it [00:07:00] doesn't moving along another place where you can count pounds.

[00:07:04] Your money is in stocks. Yes. In stocks annually, I would say stocks can give you back something of. Around eight to 10%, depending on the way you invest. Of course, me personally, I grow my money through dividend investing and I enjoy watching my money grow that way. Now there are many places where you can start an account and start investing.

[00:07:32] But me personally, I use . Now presently M one has a promotion going on. If you started an account with them using the link in my show notes, you will start off with $50. I would also get $50 for referring you, but you will start your account with $50. I've been using  for more than three years now. And I'm pretty happy with them.

[00:07:56] One aspect I like about, and one is that I can borrow [00:08:00] money against my account. So that is pretty nice. Once again, that link will be in the show notes. So move it along the next place where you can have compound interest. Yeah. Real estate. Yes. And real estate by flipping houses, you can definitely build on compound interest what the rates are.

[00:08:23] I don't know. Cause I don't do much of that, but yes, you can do it once again. Do your research and find out for yourself. The last place where I get compound interest is in crypto currencies. There are platforms where you can lend out your coins to them and they will give you back. Five 10, sometimes even need a 15% back in your money in order to use it.

[00:08:51] What they do is they take your money and lend it out to other companies at a higher rate. And the reward back to [00:09:00] you is the interest rates that I just explained not too long ago. Now I have an account with block fi and Celsius network. Those are two lending platforms that I use. And if you would like to get on those same platforms, I have referral links in the show notes for block fi if you deposit $100, you will get $40.

[00:09:24] Right back. I would also get $40 also from Blockfi for Celsius. Now, once you deposit up to $400, you will get a reward and then I will get a reward later. But I think it's up. Yes, it is definitely up to $400. So once you deposit at least $400 onto their account, that's just some of the ways you can use compound interest.

[00:09:47] There might be some other ways, but for right now, those are the ways I know. I am implementing it. There's one thing I want you to remember is that you have to start young. You have to start [00:10:00] real early with this, and this is why I would like parents to know this and teach this to their children because the earlier they.

[00:10:09] They will be well off. They will be in a nice place coming in their thirties and forties with not that much effort, just being consistent. So there you go. If you, Charlotte is in a, at a good age and a good place to learn compound interest, get them started. Get them started now. So I'm going to wrap this up once again.

[00:10:33] I would like for you to share with other parents and let them know we're here. What we're doing here at raising financial freedom. Once you. Stay safe. 

[00:10:43] Introducer: [00:10:43] We really hope you enjoy this episode of financial freedom. The podcast stay connected with us directly through raising financial freedom.com. You can also join the discussion on social media, which you can also find links on our website.

[00:10:57] If you would like to speak with us, please send us an [00:11:00] email through info@raisingfinancialfreedom.com and as always thank you for pushing your mindset towards a better reality. This. It's the most thought provoking portion of your day. Don't forget to please like, and subscribe to stay fully up to date until next time.

[00:11:15] Be kind to yourself and each other. .