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Hi Team,

Today I would like to talk about the most exciting part of financial intelligence and learning how to manage your money, "the power of compound interest", and how this can generate long term wealth for you and future generations. As Einstein famously stated "Compound interest is the eighth wonder of the world".

The good news about compound interest is that it is available to everyone that saves and invests money and it happens completely automatically. But the bad news is that it takes many years to really feel the benefits of the compounding effect and growth in the value of your investment. Compound interest is defined as, "reinvesting your earnings in an investment so that you earn interest on your interest".

This compounding effect happens in almost all forms of investment but the two big variables that have a huge effect on the growth are the rate of earnings and the length of time. The longer you have the money invested, the longer your money has to grow through the magic of compound interest. For example; if you invested $100.00 per month at 8% return after 25 years it would be worth $87,727.00, or if you invested $1000.00 per month (a very realistic goal) at 8% return after 25 years it would be worth $877,271.00. (see page 145 of The Barefoot Investor). Note: $300K is from your actual savings and $577K is from compound interest!

"Learning how to handle money is more than dollars and cents. It's about character and responsibility", Warren buffet.

Other than the magic ingredient of time, the other vital prerequisites for growing your wealth through investing are the discipline to save your money and the character to maintain this saving over a long period of time. You must also invest in a stable high earning fund that doesn't charge you exorbitant fees.  A good way to find the best investment fund for you is to read some investment magazines such as "Money magazine" or "Financial review - Smart Investor". My favorite financial weekly podcast is, " The Money Cafe" by James Kirby & Alan Kohler, it's a great way to get up to date economic and investment advise and be entertained by funny and insightful commentators.

'It's not how much money you earn, but how much money you keep, how hard it works for you and how many generations you keep it for", Robert Kiyosaki.

On page 179 of "The Barefoot Investor", Scott Pape lays out some really compelling figures and shows how through the power of compound interest you can become independently wealthy. He outlines the following realistic scenario;

You save and invest $5000.00 per year ($100 per week) for ten years at an average rate of 10% growth, then you stop saving and investing, but let your investment grow for another 35 years at the same rate of growth. You will have only saved and invested $50,000.00 of your own money, but your investment account at the end of the 45 year term will be worth $2,709,677 (That's $2.66M of earnings from compound interest alone!) Note: the ASX share market has returned an average of 10.8% growth for the last 30 years.

If you kept this investment fund going for another few decades, imagine what it would be worth and the impact it would have on your children and grand children? I strongly recommend you to read this section of Scott Pape's book which is very inspiring and could actually change your life.

Now, back to business; a little reminder that before the next Team Meeting on 14th march, you must all have chosen and booked a training course of your choice. I have already helped a few of you to choose a course and Sharon is ready and waiting to book it in for you? Please let me know if you need any help with finding an appropriate course?

Thanks for reading,
David