With all the daily demands on your money, it may be hard to save money for future needs. It’s important to start saving money now—even if it’s a small amount.
If you invest money for two or more years, the money you make interest on having the money invested earns more money. This is when your money makes money. In other words, your money is compounding. By leaving your money in the investment, your money grows faster. The interest that your money is earning increases your investment. Your money is working for you—helping you reach your long-term goals.
For example, if you invest $100 at 5 percent at the beginning of the year, you will have $105 at the end of the year. At the end of the second year, you earn interest on the $105, making the total of $110.25. Check out the figures below.
|Amount Invested||Interest Rate||Time Invested||Interest Earned||Total $ at Year End|
|First Year||$100||5%||1 year||$5.00||$105.00|
|Second Year||$105||5%||1 year||$5.25||$110.25|