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The Miracle Formula

The power of compound interest is indeed incredible. When asked what was the greatest invitation he’d ever seen Albert Einstein replied without hesitation “compound interest”. The formula for compound interest is simply this:

P x R x T = $

P is the principal, the amount of money you initially invest
R is the interest rate your investment will earn over time
T is the time you allow your money to grow

Here's how to use the formula:
Add all the interest you earn to the original principal - then your interest will begin earning interest!
Make additional contributions to the principal on a regular, consistent basis.

A small amount of money invested on a consistent basis can grow beyond your wildest dreams.

Can you save one dollar a day?

There are many great examples of the power of compound interest. A very simple one to understand is our "dollar a day" illustration. Let's assume the parents or grandparents of a newborn baby begin saving one dollar a day from the baby's birth and each year that is invested into a mutual fund with an average annual growth rate of 9%. When the baby gets older they continue investing one dollar a day until they are ready to retire at age 65. The total investment over this time is $23,725. The actual value of the account, though, is now $1,094,375 because of the power of compound interest.

Do you know a new parent or grandparent who would be interested in the illustration above? Send them our free report.

Learn how to easily calculate compound interest using the Rule of 72.

 

 

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TEACHERS: The Let's Save America book is approved by the Idaho State Board of Education for use in schools. Learn how to get copies and have your class participate in a financial education teleseminar.


 

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