Ever heard of the phrase “make your money work for you”? That, in a nutshell, is what compounding does. It’s your money making more money over time.
Compound interest can grow your wealth because it is interest that’s earned on top of interest already earned. This concept applies not just to the money saved in your bank account, but on returns earned on your investments too.
Investing is one of the most powerful things you can do to build wealth for the long-term. In Singapore, a high-yield savings account may give you 1% annual interest (after you’ve fulfilled all necessary criteria) but an investment in Singapore real estate investment trusts (REITs) could give you an average annual return of 6.9%.
Here’s an example of how compounding works to turbocharge your investments. Suppose you invest $100,000 today. 20 years later, your original investment would have more than tripled to $386,968, assuming it earns 7% every year....