THE EIGHTH WONDER OF THE WORLD

Have you ever heard of the eighth wonder of the world? We all know that there are Seven Wonders of the World. So what am I saying? Eighth wonder of the world? Really?!  Maybe you’re thinking now that I’m fooling around and saying “You must be kidding. There are only Seven Wonders of the World!”. But hey, I’m not kidding. There is an 8^th Wonder of the World and I’m going to share it with you! Let me tell you what is it, and the 8^th Wonder of the World is...(*drumroll please!) COMPOUND INTEREST!

Yes you got it right! The Eighth Wonder of the World is not a place or anything but simply COMPOUND INTEREST. Do you know who discovers it as the eighth wonder of the world? Albert Einstein is the man! Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it... He who doesn’t, pays it.” Do you believe in that? Well if you’re going to ask me, I do believe that’s why I’m sharing this to you. 

What is Compound(Compounding) Interest? How does it work?

Compounding interest is simply having interest on interest. How does it work? I’ll give you an example.

Let’s say you have Php50,000 and you have nothing to do with it. Now you decided to put it in a Time deposit in your bank and the banker says that he will give you a 5% interest annually for 5 Years. Let’s compute it:

Year	Principal(P)	5% Interest(i)	P + i	Total
0	50,000	(50,000x5%) = 2,500	50,000 + 2,500	52,500
1	52,500	(52,500x5%) = 2,625	52,500 + 2,625	55,125
2	55,125	(55,125x5%) = 2756.25	55,125 + 2756.25	57,881.25
3	57,881.25	(57,881.25x5%)	57,881.25 + 2894	60,775.25
4	60,775.25	(60,775.25x5%)	60,775.25 + 3038.76	63, 814.01
5	63,814.01

Congratulations! You just earn a total of Php 13,814.01 without doing anything. Isn’t that great? Now do you believe with Einstein that it is the Eighth Wonder of the World? No? Yeah right. Maybe Php 13,814.01 earnings within five years is just not enough. But let me tell you this. Time deposit is just not the only vehicle used for compounding interest and for me, I don’t prefer it for the growth of my money. There are other vehicles that you can use which will give you higher interest as much as 12% and 16% interest. Let’s say Vehicle B gives you 12% interest and vehicle C gives you 16% interest annually. Let’s compare it with Time Deposit and classify it as Vehicle A.

Year	Vehicle A (5%)	Vehicle B (12%)	Vehicle C (16%)
0	Php50,000	Php50,000	Php50,000
1	52,500	56,000	58,000
2	55,125	62,720	67,280
3	57,881.25	70,246.4	78,044.8
4	60,775.31	78,675.97	90,531.97
5	63,814.08	88,117.08	105,017.08
10	81,444.73	155,292.41	220,571.75
20	132,664.89	482,314.65	973,037.97
30	216,097.12	1,497,996.11	4,292,493.85

Now tell me, do you see the real power of Compounding Interest? Bro. Bo Sanchez thought of Compounding Interest as the Greatest Magic on Earth. But this magic can be also dangerous that’s why Albert Einstein quoted “He who understands it, earns it. He who doesn’t, pays it.” What does that mean? From the example above, I have shown you how will you earn with the use of compounding interest. Now I’m going to tell you how people pays for it.

Do you get some Loans? Or do you use your credit card that much? Compounding interest also applies with these things. If you’re used to have loans and you use your credit card in a bad way(yes there are good ways of using your credit card), you have compounding interest as your enemy. And I’m telling you, you’re in a big trouble. So make up your mind and have compounding interest with your side.

Want to know more about the other vehicles like vehicles B and C? You can subscribe on the upper right of my page to keep updated. See you at my next article. :)

All the best,

Paul Anthony R. Aguilar, RPh

PS: Download the FREE E-book of Bro. Bo Sanchez - “My Maid Invests in the Stock Market” to see how she harnessed the power of compound interest and how will you do it too.

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