Power Of Compounding Effect
Power Of Compounding Effect In this blog we're going to explore about Compounding Effect 📈. Let's start with some basic concept -: What is Compounding Effect ? Compounding is the ability of an asset to generate earnings, which are then reinvested or remain invested with the goal of generating their own earnings. If you extrapolate the process out, the numbers have the potential to grow as your previous earnings start to provide returns. How is Compounding Effect help you & me to beat inflation ? Or to become Financially Independent ? Let’s say you have Rs.100 and you put it in a savings account that earns 5% interest each year, compounded annually. At the end of the year, you earn Rs.5 in interest and it’s put into the account. The next year, thus, you’re earning 5% on the new Rs.105 balance. At the end of the following year, you’ll actually earn Rs.5.25, giving you a total balance of Rs.110.25 at the end of the year. Notice that the earning has gone up, even though the in