Learning how to understand compounding interest rates and how they work is critical to any long term financial success. Getting the wrong interest rates on a loan can destroy your ability to save money, keeping you in debt — getting the wrong interest rate on an investment means you’re leaving money on the table.
The following interest rates need to be researched, understood, and compared exhaustively:
Mortgage Rates. Buying a house is one of the biggest financial moves anyone can make, and getting the right current mortgage rate is essential to success. Getting a mortgage rate that is low at first and explodes later can be a horrible idea; getting a mortgage rate at the wrong time is equally as damaging.
Savings Rates. Increasing your savings are absolutely essential to keeping your money constantly growing. Inflation is destructive, as we’ll talk about below. This means every bit of interest you can generate is a life saver, and that includes your bank accounts. Consider getting an online savings account to store savings, because they typically have a better rate than traditional banks. It does, of course, really depend on the bank.
CD Rates. These are extremely similar to the above savings account and checking routes. The only difference is that you’re supposed to keep your money in the accounts for a certain time, which makes them more profitable because banks can pay higher interest if they know they can count on a certain amount of money being in their accounts for a certain period of time.
Inflation Rate. This is something few people talk about, and they really should. The real interest rate is the traditional rate after you subtract inflation. To learn more about inflation, make sure to read our real inflation rate article.
Wealth Management 101
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