how's it going today guys so this is a
video that I am very excited about
because it is so eye opening to people
who have never played with a compound
interest calculator before if you're
somebody who has you probably know where
this story is going but I want you to
promise me this if you have never played
with a compound interest calculator in
your life before the very next thing I
want you to do after this video after
you subscribe if you're new to my
channel and drop a like the very next
thing I want you to do is go down in the
description and click the link for that
compound interest calculator I'm gonna
link it up and I want you guys to play
around with it for 10 or 20 minutes just
to see the amazing capability of
compound interest in fact albert
einstein called this the 8th wonder of
the world because of its ability to make
people freakin rich honestly so this
video i'm going to be going over to
compound interest interest examples as
well as kind of explaining what it is
there's not a lot to it it is confusing
but you know when you look at the
don't understand that but when you play
with the calculator it just makes sense
so i'm hoping to really shed some light
on this for you guys and encourage you
guys to get started early with any kind
of investing really time is on your side
when you're young and you're gonna see
going through this example is the huge
difference between starting early and
starting late in the game so make sure
you're one of those people that gets
started early even if it's a small
amount you got to start investing young
to take advantage of the compound
interest you need time to be on your
side okay so first of all let's define
what it is so compound interest is
basically interest calculated on the
principle as well as the accumulated
interest of the previous periods of the
deposit basically that makes sense but
the best way to explain it
is earning interest on your interest so
you earn interest on a certain
investment then the interest you earned
earns interest that's as simple as it is
guys
maybe that formula looks confusing its
interest on interest the longer amount
of time you invest the more interest you
earn and the more interest you earn on
that interest compound interest yields
significantly more than simple interest
okay what are some examples of compound
interest well let's say you're invested
in the dividend stock and then you
reinvest those dividends if people make
the absolutely fatal mistake of not
reinvesting those dividend
and they're getting dividend checks
every every quarter I feel bad for those
people because they miss out on a ton
they really do so if you're somebody
who's investing in stocks and you're
getting those dividend checks in the
mail call up your broker tell them you
want to reinvest those things because
you're missing out on so much money you
need to be reinvesting those dividends
it's it's crucial to your financial
success so that's just one example there
are compound interest and most uh you
know mutual funds you're involved with
they're automatically set up to reinvest
those dividends that's how they should
be make sure that you're doing this to
take advantage of compound interest
because if you're just getting those
checks in the mail for dividends you're
not going to be taking advantage of
compound interest because you're getting
that interest basically paid to you as a
cash payment instead of reinvesting it
but anyway so the formula I'm not going
to go into it because honestly I'm just
not going to that's just going to
confuse things I'm not a math whiz but
if you want to know where the actual
compound interest formula comes from
it's this guy right here so the first
example we're gonna look at is somebody
who invests $10,000 principle at a ten
percent interest rate per year and this
is how much they earn over a digit
number of years okay so after one year
they've earned ten percent on ten
thousand or one thousand dollars so at
that point they have eleven thousand
dollars after five years they have a
little over sixteen thousand dollars ten
years down the road they have just under
twenty six thousand dollars so obviously
when you first get started that's
nothing earth-shattering
it's decent returns but it's nothing
that's like jumps out at you crazy
you're kind of like okay yeah you're
earning a little bit more than you would
if you were just making simple interest
on that but it's when you get years down
the road where the exponential curve
just takes place in you just your jaw
drops
okay fifteen years later they are at
forty one thousand seven hundred seventy
two just under forty two thousand
dollars twenty years later they're at
sixty seven thousand dollars 67 to 75
after twenty-five years
you now have six figures you're at just
over one hundred eight thousand dollars
on your ten thousand dollar investment
after twenty-five years thirty years
later you're at just shy of $175,000
there's a significant jump between
twenty-five and thirty years right there
as you can see so this is where things
start to get interesting guys okay after
35 years
you're just shy of three hundred
thousand dollars
on your $10,000 investment you're at 280
1024 and 37 cents and after 45 years
guys you have under just under five
hundred thousand dollars you have just
under half a million dollars at that
point from your ten thousand dollar
investment over forty five years as you
can see time is what you need for
compound interest you need to give these
things time at first the growth is slow
it's there but it's slow but when you
look at forty five years down the road
its astronomical the difference between
simple interest versus compound interest
now the next example is a little more
realistic for you guys because let's be
honest - as ten thousand dollars let's
say you're let's say you want to invest
for forty five years you want to retire
at set at 65 years old who has ten grand
at twenty years old
that's not a very you know realistic
situation so this one should be more
realistic for you guys let's say you had
a hundred dollars a month that you
invested that same ten percent interest
rate until you were 65 years of age now
that's a little more realistic a hundred
dollars a month is twelve hundred
dollars a year no matter what you're
doing you should be able to come up with
a hundred dollars a month to invest
alright that's not an earth-shattering
amount of money that could just be as
simple as for invest in your tax return
most people get a little over a thousand
dollars from their tax return so let's
say you agree to invest your tax return
every single year earning ten percent
interest and some people may argue that
ten percent interest is a little bit
high but if you think that's high go in
that compound interest calculator change
the figures around and you're still
going to see these kind of crazy results
they may not be as high as far as the
dollar amount but the difference between
the values based on time will be equally
significant so let's say you invested
$100 a month starting at twenty years
old you got your first job every single
month you set aside one hundred bucks
and you invest it if you start at twenty
by the time you're 65 years old you're
gonna have eight hundred sixty two
thousand six hundred eighty-five dollars
in eighty cents just under $900,000
you're almost a millionaire if you start
at twenty five so if you wait five years
to do this okay you're gonna have just
over half a million dollars so right
there the difference of waiting five
years is a difference of over three
hundred thousand dollars over three
hundred thousand dollars you miss out on
by waiting five years that's pretty
crazy guys now we look at starting at
thirty years old now you're looking at
three hundred twenty
five thousand two hundred twenty nine
and twenty four cents still a lot of
money guys but now we're talking about a
difference of over half a million
dollars a difference of over $500,000 by
waiting until you were thirty instead of
starting when you were 20 investing just
one hundred dollars every single month
or twelve hundred dollars each year
thirty-five years old you get started
investing $100 a month until you're 65
you're gonna have just under two hundred
thousand dollars that's not I mean in
the grand scheme of things looks like a
lot of money but if you're trying to
retire that's not a lot of money guys
the figure that most people put on it is
you're gonna want like 20 times what
you're earning is the salary in your
retirement to be able to retire some
people say fifteen but people are living
a lot longer now so they're more
realistic figure is you're gonna want
twenty times your salary in order to
retire and maintain the life that you
have now and everything you're enjoying
in life now we'll talk about 40 years
old some from 40 to 65 you invest $100 a
month at 10 percent interest you're
gonna have one hundred eighteen thousand
dollars basically if you start at forty
five years old you're well under a
hundred thousand you have sixty eight
thousand seven hundred thirty dollars at
that point and if you're if you're the
poor soul that waits until they're 50
years old then starts investing $100 a
month for 15 years until they're 65 at
10% interest they're gonna have thirty
eight thousand one hundred twenty-six
and ninety-eight cents may be enough to
buy a car
certainly nowheres near enough to go
retire off of you gotta invest early
that's the difference of having a
million dollar retirement versus a forty
thousand dollar retirement the
difference of ten years is a difference
of having a three hundred thousand
dollar retirement versus a basically
nine hundred thousand dollar retirement
go play with these numbers guys jump on
that compound interest calculator let's
say you were ambitious and you invested
two hundred a month three hundred five
hundred a month let's say you were going
crazy look at how much it changes those
numbers the last thing I want to take a
look at I want to ask you guys a
question I want you to answer this in
the comments below three scenarios here
I want you to guess who has the most
money who has the middle amount of money
who has the least amount of money so the
person who invests 50 dollars every
single month six hundred dollars a year
okay from the age twenty to sixty five
years old alright then we have somebody
who invests five hundred dollars a month
from the age 45
five to 65 and then we have somebody who
invests $5,000 a month from the age of
sixty to sixty-five and this is still
earning that same ten percent interest
rate per year so go ahead and answer in
the comments who do you think made the
most money or who has the most money in
their retirement who has the middle
amount of money who has the least amount
of money okay
who has the most money you probably
guessed it based on this initial figure
here the person who invested $50 a month
from age 20 to 65 has four hundred
thirty one thousand three hundred forty
two and ninety cents
the person who invested ten times that
amount from age 45 to 65 has three
hundred forty-three thousand six hundred
fifty dollars or the least amount of
money of the three the person who
invested ten times that figure or five
thousand dollars a month from sixty to
sixty-five has three hundred sixty six
thousand three hundred six dollars now
let me ask you this guy's what seems
more realistic as far as what you could
do every single month could you
sacrifice fifty bucks a month from age
20 to 65 pretty much everybody can I
don't know anybody who can't all right
unless you're in really dire straits now
could you really invest five hundred
dollars a month from 45 to 65 you
probably could if you were financially
well often if you were good at balancing
a budget but could anybody realistically
save five thousand dollars a month from
sixty to sixty-five I say absolutely not
that's that's a crazy number but I just
wanted to show you guys the difference
of the time here that you need time to
be on your side the last few pointers I
want to make on compound interest are
this think of compound interest as the
time value of money the more time you
give it the more it's going to build you
need time to be on your side that's why
you guys got to start young it's it's so
important okay
the growth with this is exponential so
if you go on that compound interest
calculator it shows you the graph you're
gonna see that exponential curve we're
at first you're not seeing much of a
difference but after you give it a good
number of years that curve just takes
off and it's just crazy what compound
interest can do for you that's why
Einstein calls it the eighth wonder of
the world because it's just so amazing
the last thing that I want to say is
this compound interest can work for you
or against you because you if you have
compound debt all right if you have debt
that's earning debt you're gonna see the
same figure but working against you
so if you're somebody who's paying off
some kind of loan and you're basically
at that point you know paying interest
on that debt and then interest on that
interest for your debt it works the same
way but backwards so just something else
I know that's probably kind of sounds
kind of scary but really consider when
you're taking out loans that you may be
basically paying interest on that
interest on that loan so it can work for
you or against you so make sure you're
one of those people who has compound
interest working for you anyways guys
that's pretty much all I got for this
video if you enjoyed it please drop a
like if you guys have any other cool
scenarios that you played around with on
that compound interest calculator drop
them in the comments if you are new to
my channel please consider subscribing
to be notified of any future uploads and
as always I thank you guys for watching
this video
you
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