Personal Finance & Money Stack Exchange
Personal Finance & Money Stack Exchange

Questions tagged [compound-interest]

Compound interest is the result of reinvesting interest so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

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Why do people save so much?

When I am old and retired (70 years +), I don't plan to spend a lot of money. I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. Since I don't need to get to work every day, I wouldn't need (or…
cearl
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What are the alternatives to compound interest for a Muslim?

I have read the importance of saving early and the power of compound interest many many times. However I am a Muslim and cannot participate in anything involving interest. I also learned that keeping money in terms of just cash is the worst form…
user4884
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Would compound interest work better if all my accounts were combined into one?

My wife and I currently have three retirement accounts from different jobs. The only one currently getting paid into is my TSP account. Would we realize better gains if we combined the other two accounts into the TSP? Say they are all earning 10%…
IEnjoyEatingVegetables
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How do I calculate monthly compound interest in Google Sheets?

I have a financial spreadsheet with a column of all my deposits into my savings account. The leftmost column lists the dates of the deposits. Now, let's say my savings balance is $100.00 and my monthly interest is 0.25% (1/4 of 1 percent). This…
grgoelyk
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Is there any instance where less leverage will get you a better return on a rental property?

The larger a mortgage I have on a property the less money I have to put up front so my initial cash flow is worse but my cap rate and overall return is better. However the larger my down payment the better my cash flow immediately because the…
LCIII
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Which mortgage should I pay off first? Same interest rate and mortgage length

tl;dr: I have two amortized mortgages; one big and one small. The conditions (interest rate and mortgage length) are exactly the same. Which should I pay off first? I have always heard that you should pay off the debt with the highest interest rate…
genbatro
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How does compound interest work with stocks?

I just learned about compound interest, and I want to know if I understood it right: You buy a stock, and then you just keep it. And over time, you will just earn interest on your interest. Is that correct? You have to do nothing else than to just…
heresmyname
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When computing monthly interest, why do we divide yearly interest by 12, rather than taking the 12th-root?

I've been reading about loans and interest rates, and I've run across a mathematical sticking point. The crux is that, if my loan's outstanding balance is £100,000, I make no payments, and it has an annual interest of 8%, I expect that the…
ymbirtt
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Continuous compounding in practice

A common explanation for the mathematical constant e (2.71828...) is that it is the factor by which an investment would grow at 100% interest rate over a period if it is continuously compounded. In other words, if you were to invest 1 million…
jonallard
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401k compound interest vs other compound interest

Whenever I see the presentations or documents imploring me to invest in 401k and retirement, it always shows a nice graph showing a 7% compound interest and how less money saved earlier in your 20s grows to be higher than money starting to get saved…
Sam
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How to calculate savings account interest if you deposit and withdraw irregularly?

It's easy to calculate interest on a fixed principal. If you have for example $1000 deposit on your savings account and the rate is 0.25% compounded every whatsoever and you want to know how much is the interest after some time then just use the…
user92831
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Does the growth of home value benefit from compound interest?

I read Investopia's definition and my take away is that compound interest applies to an investment that yields some return on a regular basis and that yield is reinvested in that instrument. If I have a property as an investment property, then yield…
Scott Muc
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What's the formula to calculate the monthly or lump-sum investment amount for a desired future value?

Give the following values: Inflation Rate 2% Expected Return Rate 5% Future Value 1,000,000 monetary units Years to Target - 10 What is the formula to calculate the amount of? Lumpsum investment Monthly investment
ohho
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Financial pros and cons of having a rainy day fund in a savings account versus invested?

I used to have about 4 months of expenses in a savings account as a "rainy day fund" in case of emergencies. The last year or so, though, I've switched to having a minimum of expenses (about 1 month's average expenses) in my savings account and…
canary_in_the_data_mine
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Am I paying too much in mortgage interest?

Hi there all you smart people. I am looking for a hand on a mortgage I currently hold. I will give a little back story to hopefully let you see where I am coming from. I have a summer home (the only property I own) and was unable to get a…
JollyGoodTime
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