![]() Use compound interest to your advantage, and invest for your future. Do your best to pay off high-interest debts before the compound interest takes its toll on your finances. If you already have high-interest debt, refinancing to a lower rate could be a solution for you, but might not make sense for everyone. Make sure you only take on debt that you can afford to pay back, at an interest rate that won’t hinder your ability to save for your future. Don’t take on unnecessary debt like Amanda did. What can I do to avoid the pitfalls of compound interest? Look at what your savings could look like based on different timeframes and rates of return. Securities and Exchange Commission has a compound interest calculator available on its website. As Warren and Charlie discovered, even modest contributions, paired with investment returns over long periods of time, can help you reach your financial goals. Be consistent and patient: Consistent contributions to an investment account over time gives compounding more principal to compound on and can enhance returns. ![]() ![]() The earliest years of investing are the most important when it comes to compounding. A 25-year-old who puts away $500 a month until age 65 with a 7% rate of return would have nearly $1.2 million, while a 35-year-old doing the same thing would have only $567,000 at age 65. The longer your money is invested, the more opportunities it will have to grow.
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