Reading, viewing and speaking to look at the title of the text, what do you know or want to know about compounding? Read the text and tell a partner what you can learn from . IT secrets of money compounding. Young people today will be concerned with what the future might hold with many chAllenges facing them. In general, one might simply aspire to be happy and secure with enough to enjoy a good lifestyle. The question of personal wealth inevitably arises, but one cannot and should not always rely on others for money. However, if one only gets a little pocket money or cash from a part time job, IT is hard to imagine a future of personal wealth becoming a reality. The truth is that personal wealth stems from investment, and there is no amount too small to start investing, especially when one has the benefit of time. This is where the power of compounding can work miracles. Understanding the secret of compound interest or compounding is a fundamental part of increasing our financial literacy, and is a method were by we can gain control over our money in the freedom that brings. First, we must understand how interest works. Simple interest is the amount of extra money you get back when you put a sum of money in a bank account or other investment. This money you put in is a deposit, also known as the principal or capital of the investment. The bank will offer a rated interest for a certain period of time, say three percent for one year. Therefore, if one makes a deposit of one thousand, you on after one year, you will have one thousand and thirty you on your principal, plus three percent. Compound interest is when interest is paid on the original deposit and most importantly, with any interest already earned by earning interest on the principle and the interest already earned on top, the overall amount begins to grow at a greater pace over time by keeping our one thousand and thirty you on invested for longer, without withdrawing any money, we end up with more than if we spend the interest. As this chart illustrates, at first, the two types give the same result, but then by earning interest on interest, the compounding curve begins to exceed that a simple interest. The next thing to appreciate is that compound interest can work for you or against you. Albert einstein is reported to have hailed IT as the eighth wonder of the world, however, added that those who understand IT earned, but those who do not pay IT whether interests paid to you when you deposit money IT is charged to you when you borrow IT interest rates are always higher when borrowing and saving. That is why this is a secret, because many people may not fully understand how IT works and therefore pay IT rather than earn IT. Another hint that helps you use compounding to your advantage is known as the handy rule of seventy two. This tells us how many years IT will take a deposit or investment to double in value. We divide seventy two by the rate of interest. For example, five percent that gives us seventy two divided by five is equal to fourteen point four. So if we invest one thousand you on and an unchanging rate of five percent IT will reach two thousand you on in just over fourteen years. If we can get a rate of six percent IT will only take twelve years and ten percent just over seven years. Again, this illustrates the advantage of starting early. Although one might not be able to find a ten percent return over a long period, compounding at a lower rates still gives a good result over time. Of course, any attempt to forecast future returns assumes the level of interest in the future. This rate of interest is influenced by many factors and cannot always be guaranteed. In the world today, interest rates are historical, very low, so most bank accounts pay little interest, although compounding will still work over a long period of time, in times of historically low interest rates, IT is especially important to start saving early. If you look for a higher interest rate to be paid on the capital, you will have to look to other investments than a simple bank account. There are many other ways to invest, but they are risk here. All investments involve the degree of risk of some kind, so be cautious and not invest more money than you can afford to lose. Don't invest in something you don't really understand or just because everyone else seems to be doing IT. IT is also essential to comply with the tax laws of your country. As you may be liable for tax IT may seem that as a Young person who does not earn a lot, you will find that difficult to enrich yourself financially to prosper in the near future. But this ignores perhaps the biggest asset a Young person has time. Therefore, the secret of the safe wonder is to start saving today.