Before we begin with the story, compound interest is the interest earned on both the principal amount and any accrued interest over time. It’s a powerful financial concept that can help your savings or investments grow exponentially over time. Now, let’s get back to the story.
Sarah earned $300 every month when she was still in her early 30s. At that time, she was still young and wanted to enjoy herself even more. One faithful Saturday, her mother called her and asked her what her plans were for her future and retirement.
At first, she thought her mother wanted to bring up the topic of not having a man in her life at her age. When she heard the word “retirement,” her mouth was sealed because it was a different topic altogether. She was silent for a while and finally came up with an answer: “I will figure that out.”
Her mother made her understand that there is a time for everything, and if she continued this way, she would likely grow old without having any savings for her retirement.
Also Read: Financial Problem: Is My Boss a Ritualist?
Late at night, Sarah was deep in thought. She thought all through the night about what her mother had told her about retirement.
Since she was finding it difficult to sleep due to her earlier discussion with her mom, she thought it wise to wake her mother up to help her with ideas.
She went to her mother’s room, woke her up, and sought more knowledge on how to go about her retirement plans. Her mother raised the topic of compound interest and asked if her daughter was knowledgeable about it.
She said she had heard about it but lacked understanding of how it works. To make things clearer to her, her mother cited an example: “Let’s say you deposit $1,000 into a savings account with a 5% annual interest rate.
At the end of the first year, you’d have earned $50 in interest, making your total balance $1,050. In the second year, you earn 5% interest on the new balance of $1,050, which is $52.50 (5% of $1,050). Now your total balance is $1,102.50.”
After listening to her mother speak, Sarah thought it wise to try that plan.
She went to the bank and requested what it would take to open an account with compound interest. After the bank had explained everything to her and what she needed to expect, she went ahead and deposited $20,000.
At first, it was difficult for her to do, but as time flew by, she never bothered about it again. She focused on her new income and finally got married at 36.
Her mother died a few years later. It was indeed a deep hole dug in her heart.
Her mother had been the only woman she trusted all her life. But unfortunately, death came knocking.
At 75, Sarah, alongside her family, were already enjoying the interest accrued from the money she deposited many years ago. She and her family couldn’t beg for food. In some cases, she goes ahead to support her children’s families financially at the expense of her compound interest.
She encouraged her children to do the same thing her mother taught her while she was young, and of course, they heeded her advice.
How Compound Interest Works
Compound interest is the interest earned on both the principal amount and any accrued interest over time. It’s a powerful financial concept that can help your savings or investments grow exponentially over time.
The Results
At 75, Sarah and her family were enjoying the interest accrued from her initial deposit. She supported her children’s families financially and encouraged them to do the same. Sarah’s story demonstrates the power of compound interest and the importance of planning for the future.
Conclusion
Compound interest can be a game-changer for your financial future. Take the first step today and start building your wealth. Remember, it’s never too early or too late to start planning for your future.
