It’s believed 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.” The true origin of the quote is up for debate, but the sentiment expressed is certainly true. Compound interest is a powerful concept. When it’s applied to your savings strategy, it provides an incredible boost.
Saving money is always a good idea. By saving as little as $20 each week and putting it in a savings account, you save over $1,000 in a year’s time—and that’s before adding interest. Fortunately, accounts designed for saving almost always earn competitive interest. This lets your money grow gradually without any effort on your part. Community Bank even offers some checking options that earn interest. This gives you extra incentive to park money in a savings account, a money market account, a certificate of deposit (CD) or other savings options. And, of course, the more money you have in these accounts, the more interest they earn and the faster they grow.
On the other side of the interest coin is the interest you pay on borrowed money. While some forms of debt are “better” than others, eliminating debt is a great way to save money. This gives you the benefit of earning interest from saved money without paying interest on borrowed money.
Many have found success paying off debt using the “debt-snowball method.” With this method, you make minimum payments on all accounts, but you use the spare money in your budget to make bigger payments on your smallest debts. Once the smallest balance is paid in full, the payment normally allocated for that account is used to pay off the next lowest balance. The snowball grows as it rolls and soon, you can have your debt eliminated.
You may want to consider paying off debt that has the highest interest rate first, rather than the debt with the lowest balance. If you’d like to sit down with someone from Community Bank, we’d be happy to help you devise a strategy that works for your situation.
Saving money can put you and your family in a more secure financial position. Whether you’re saving for a rainy day, a big vacation, a dream home or something different altogether, Community Bank of the Chesapeake is on your side to help you reach your savings goals.