Compound interest for all

Enable’s IFA’s in Bishop’s Stortford see that compound interest is one of those mathematical things that we tend to take for granted when we know about it. Many have benefited over the years form diligent savings over the course of many years, allowing compounding interest to do its thing behind the scenes, doubling, tripling and sometimes even quadrupling savings over an investing lifetime.





Many adults however may not fully appreciate its power and chose to ignore the benefits of making compounding interest an ally from an early age. If grown adults do not fully understand the inner-workings of compound interest, imagine trying to explain it to your kids.

Maybe teaching your kids how to save and understand compound interest could be one of the best financial gifts you could give them.

Wikihow suggests giving them a bag of pennies and telling them that over the course of a week, you want them to give you a penny a day for the next seven days, as their personal banker. If they deposit the pennies in "The Bank of Dad" and compound interest begins to accrue the day they deposited the penny. Give them a “receipt” for their deposit and explain that they need to keep up with the receipts to see how much money they have added to their account. Add interest. Every other day, deposit an additional penny. Alternatively, you can match them penny for penny, but you don't want to set the unreal expectation that it is easy to double your money in a short time. .At the end of the week, have them check their balance at the "ATM" (Automated Tell-me-how-much-money-my-dad-has-for-me Machine). Gather receipts and confirm they have deposited seven pennies in “The Bank of Dad.” Then open the bank and count out its contents - all eleven pennies. Explain that the original seven pennies have grown to eleven pennies because every couple days the bank paid a penny for letting them use his or her money - that’s interest. Well it’s a start.





Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE