Welcome to today's video, where we're going to unravel the incredible power of compounding and how it can help you grow your money wisely. Whether you are a young investor or someone looking to secure their financial future, understanding compounding is essential.

Imagine you have a little piggy bank where you decide to save Rs 1000 rupees every year. Now, let's explore two different scenarios to understand the magic of compounding.

In the first scenario, you put your money into a savings account with a fixed 5% annual interest. Let's see how your money grows over time.

After the first year, you earn 5% interest on your Rs 1000, which amounts to Rs 50. So, your total becomes Rs 1050. But, the sad part is, your interest remains fixed every year, and your growth stays quite linear.

Now, let's move on to the second scenario. This time, you invest the same 1000 rupees annually into a mutual fund or any investment that generates an average return of 12% per year. But here's the magic of compounding – your 12% returns get reinvested every year!

After the first year, your Rs 1000 grow to Rs 1120 (1000 principal + 120 interest). Now, the amazing part happens in the second year – you earn 12% on the new total of Rs 1120, which is Rs 1344! And this keeps going year after year, snowballing your wealth.

Now, let's fast forward a bit. After 10 years, with simple interest, you would have accumulated Rs 1500 (1000 principal + 500 interest). But with compounding, you would have amassed a whopping Rs 33,606! That's nearly 22 times more than simple interest!

So, whether you're saving for education, a dream vacation, or your retirement, compounding can be your best ally in achieving your financial goals. Start early, invest wisely, and let the power of compounding work its magic!

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Time stamps -

0:00 Intro to the world of compounding effect
0:18 How your money grows in a savings account?
1:02 How the magic of compounding works?
1:55 The Power of Compounding vs Simple Interest

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