What I learned today in class is that when you put money in an account at the bank, the bank will pay you for keeping your money in the bank. This extra amount they pay you is called interest. For example, you see that Charlayne adds the same principal amount of $2080 each year and interest is calculated and then added to the original balance. The next year your ending balance will turn into your beginning balance. As the total amount gets larger, the amount of interest also grows, this is called Compound Interest Compound interest is when the bank pays you interest on the total amount of money that you put in the bank. As seen in Marcus’s spreadsheet he does not start saving until year ten. which sets him back 10 years. By still putting in the same amount of money Marcus doesn’t make the same amount of money at year 45 because he doesn’t have the 10 years of interest. I learned that you are never too young to start saving and you should start as soon as possible.
As seen in Marcus’s spreadsheet, he does not start saving until ten years later. Even though he is still putting in the same amount of principal as Charlayne each year, Marcus doesn’t receive the same amount of interest payments. By year 45, he misses out on 10 years of compounding interest. I learned that you are never too young to start saving and you should start as soon as possible. Unlike Marcus, you could end up a millionaire after 45 years of saving.