From the course: Managing Your Personal Investments
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Compound interest and investing
From the course: Managing Your Personal Investments
Compound interest and investing
- My husband's grandmother worked in a hospital laundry in Canada for 30 years. She was a woman of modest means, but somehow she was able to buy a house and retire comfortably. The key to her retirement? She invested in Canada savings bonds, piling her savings into them in 1982, when they paid 12% interest. In less than 10 years, she almost doubled her savings. It was an amazingly savvy decision, and a great lesson in the power of interest. It's been a long time since interest rates were 12%, but it's still critical to understand the concepts of interest and compound interest. So let's start with a definition. Interest is what someone will pay you to borrow your money. When you put money in the bank, for example, you're essentially loaning the bank your money so that they can lend it to someone else. Bonds work the same way. When you buy a bond, it works as a loan to the government or company that issued the bond. In…
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