investing guide

Why Is Compound Interest Important To Us

So why is compound interest important to us?

Compound interest on your investments can build up into a nice little pile of money over time. The chart below shows how a modest 5% rate of return can add up.

5% Rate of Return Monthly Investment Monthly Investment Monthly Investment
  5 years 10 years 20 years
$5,000 $73.52 a month $32.20 a month $12.16 a month
$10,000 $147.05 a month $64.40 a month $24.33 a month
$20,000 $294.09 a month $128.80 a month $48.66 a month
$50,000 $735.23 a month $321.99 a month $121.64 a month

In the above table, if you invested just $121.64 a month for 20 years, and earned a modest 5% rate of return on that money; you would then have $50,000 dollars.