I’ve had so many people ask me lately about compounding interest. Let me go over a little scenario to illustrate how valuable compounding interest can be. We’re talking about compound interest versus simple interest. Suppose Christopher Columbus in the year 1492 went to America and he put a dollar into the New World Bank and he got 5% compounding interest on that dollar. Then, he went down the street to the Old World Bank and he put another dollar into an account with simple interest. He got simple interest of 10% on that dollar at the Old World Bank. Columbus went back to Spain and he died.

Five hundred years passed and in 1992 his descendents finally realized Columbus had money in the bank. Columbus avoided probate. . . probably he had a trust. The descendents came to America to get their money. Some of them went to the Old World Bank and 500 years after Columbus deposited his dollar, his descendents where presented with a check of $51. Columbus got 10% simple interest on his dollar at the Old World Bank. Not a great rate of return.

Compounding interest is a different story. The other descendents went to the New World Bank where Columbus got 5% compound interest on his dollar. They were expecting a small check too. But with compounding interest Columbus’ dollar turned into $39,323,261,830. What a huge difference between compounding interest at half the rate of simple interest!

And this is a way you can manage your mortgage and take control of your assets. You can make money the old fashion way with compounding interest. You’re not putting your money at risk. You’re putting it to work for you. Learn the difference between savings and risk. Investing is risk. Savings means you’re not going to lose money, you’re saving money. You’re putting it to work for you. Learn about compounding interest.

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