It takes money to make money!
Compound interest: it sounds complicated, but it couldn’t be simpler. In fact, compound interest is one of the easiest ways to make your money grow. Interested?
To earn compound interest, begin by investing your savings and letting them accumulate interest. With time, you will earn interest not only on your investment, but also on the interest it has earned.
For example, if you invest $1,000 in a fund with a 5% annual interest rate, your investment will be worth $1,276.28 in five years!
| Your investment | 1 year | 2 years | 5 years | |
| 1 000 $ x 5 % = | 1 050 $ x 5 % | = 1 102,50… |  |
1 276,28 $ |
There are many ways of benefiting from the magic of compound interest. Here are a few examples:
| Type of investment | Yield |
| Savings account | Between 0.02% and 2.75%* |
| Guaranteed Investment Certificate (GIC) invested for one year |
Between 3.3% and 4.95%* |
| Québec or Canada Government savings bonds, invested for one year, redeemable at any time |
Between 3.25% and 3.75%* |
|
* Rate on February 23, 2009
| |
The sooner and more regularly you start investing money, the more you benefit from the magic of compound interest. To understand how compound interest works over time, take a look at the following example.
Do you want to enter your own figures to determine the value of an investment after a few years? Go to the "calculators" section on our site.
