Compound Interest Demystified

May 24, 2016
Time: The Magic of Compound Interest

Let’s say you start with $1,000 in the bank. If the interest rate is 4%, you’ll have $40 more in the account at the end of the year. That’s simple interest. But in a year or two, you earn interest not just on the original $1,000, but also on the $40 in interest you’ve already earned.

Let’s say you start with $1,000 in the bank. Since the national average interest rate on savings accounts is currently 0.06%, you’ll have 60 cents more in the account at the end of the year. That’s simple interest. But in a year or two, you earn interest not just on the original $1,000, but also on the 60 cents in interest you’ve already earned.

60 cents per year might not sound like much, but...

March 24, 2015
This Costs the Average Person 60 Cents Per Year

Answer: Charging your cell phone

That's assuming that the price of electricity never goes up and we're trapped in ZIRP, of course.