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I'm 20 and I want to start a compound interest account?
First off, what is the catch to such a concept? I know it is sweet and all but there must be some downsides to it. Can anyone name a few? Also, what is the best place to get a high interest rate? (I'm not interested in banks). I've heard about REITs and Compound dividends. Can anyone explain this to me?
1 Answer
- A HunchLv 78 years agoFavorite Answer
You are clueless... please put your money in a safe savings account until you can teach yourself a little bit more.
compound interest is not a "type" of account, it's how the interest is handled on that account. It only means that the interest you earned at the last calculation is included in the base value for the next interest calculation.
On Jan 1, you put $100 into an account earning 1% interest compounded monthly
Feb 1 you earn 1% interest = $1, so now your total is $101
Mar 1 you earn 1% interest = $1.01 (because your starting value was $101, instead of $1) = $102.1
Apr 1 you earn 1% interest = $1.02 (because your starting value was $102.1, instead of $101) = $103.3
FYI = savings accounts are paying 1% interest over a year, not a month = this is a very inflated example.
