Debit Cards V Credit Cards
When you’re under 18, you’re lucky! You can’t get into trouble with credit cards as you are under the legal age! But a lot of young people are encouraged to get credit cards when they turn 18! Beware as misuse of a credit card is one of the easiest ways to get into debt.
Let’s first look at the differences between the two. A debit card gives you access to your own money, so you are limited to withdraw or spend only as much as is in your account. When you turn 18...
Simple Interest
Let's take a look at simple interest at work.
Say your principal (or balance) is $500 – and you increase it by $100/year.
Your interest rate is 5% per annum (that means each year)
| Timeframe | Balance | Interest rate | Interest this year | Total interest to date | Total balance + total interest to date |
|---|---|---|---|---|---|
|
1 year
|
$500
|
5%
|
$25
|
$25
|
$525
|
|
2 years
|
$600
|
5%
|
$30
|
$55
|
$655
|
|
3 years
|
$700
|
5%
|
$35
|
$90
|
$790
|
|
5 years
|
$900
|
5%
|
$45
|
$175
|
$1075
|
So you can see that after 5 years of saving your total interest amounts to $175. And while that's more than you would have earned if you'd buried your money in the back yard, it's not going to make you a millionaire any time soon.
Now check out compound interest to see how your savings can really kick butt.
