March 9th, 2013
Compound interest can make you rich and it can bankrupt you. Can you provide an example that explains the two options?
Compound interest can make you rich and it can bankrupt you. Can you provide an example that explains the two options?
Compound interest can make you rich through investing with Vanguard. Compound interest can bankrupt you through credit cards.
You continue to be quick to the punch, Katherine. Yes, investing at Vanguard through no-load index stock and bond mutual funds (appreciating assets) will grow your money over time by compounding on itself again and again and again. This passive income can one day bring you wealth and the freedom that comes with that wealth.
You were right Katherine to use credit cards as an example of how compound interest can bankrupt you. Making less than the full payment on your credit card will also cause your interest to compound on itself, BUT this makes the bank rich and you poor. This can also happen very easily with school loans. What is the point of this question?
Buy appreciating assets efficiently and often and your wealth will increase over time. Buy “stuff” that depreciates quickly while incurring debt will make your poorer and poorer over time. The choice is yours. Make the right one!