What is compounding?

Compounding is when something grows over time, and the amount by which it grows is also growing. It helps your investment made into the savings, grow by larger and larger amounts each year.

Key Components to Compounding

  • How much you invest, and how regularly
  • Your growth rate
  • How long you let your money grow

For example, if you invest say $200 each month your growth rate will increase because there will be a larger amount of money that equals your compounding rate. And depending on how long you let that account sit, you may put yourself in a very good position to become wealthy.

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