I have been reading about my Family Budget in an awesome book by Dave Ramsey.
Wow. Do you know the power of Compound Interest?
I am learning that it can either work against you, or FOR you.
What is compound interest? Well, the simple form is; it's the interest that the bank either
charges you for your debt which means less money for you, or the money that the bank
pays you for having any amount of savings in their bank (more money for you!).
So what does this mean to you?
Are you thinking, "I don't have any savings..."
It means that if you want to buy that new leather couch, you have two choices.
1. Pay for it by going into debt and having to pay back the bank, plus interest.
2. Save for it first, then buy it.
What's the difference?
1. In the first choice, you pay interest to the bank because of the debt.
2. In the second choice, the bank pays you for using their bank for saving up your money!
Have I been doing the second choice? Well...I want what I want, and I usually want it now. But from now on, the bank can PAY Me.
This is a simple and easy concept to teach teenagers money management too.
Sit down with a budget worksheet and have more money than you could have ever thought!
Photo by luismi1985.
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