HOME - News - Market
09 May 2021

Finance for Dentists: The Power of Compound Interest

Author: Luigi Compopiano

The basic concept for each saver is the importance of compound interest and how time can help us to grow our returns exponentially. This concept is easy but at the same time complicated. Investors like Warren Buffett and Ray Dalio made a fortune thanks to compound interest.

For those who have never invested, managing your savings can be very difficult:

When starting?

What to invest in?

What if I lose everything?

These are the most common questions that we had set ourselves when we started investing. There is something more: where we live shapes our decisions, even the most important ones. We do not talk about investments with friends, and daily we hear the stock market is precarious. So, why do I have to invest? That is the reason why lots of savers leave their money in the bank account, believing safer. People who invest are often deceived by their eagerness because they do not see short-term returns and then leave their money in the bank account again (or in high-risk assets). In this case, they lose the opportunity to have the best ally for the growth of savings. 

Compound interest could seem a ridiculous and too slow concept in the concise term, but it is not. A small amount of money, if invested every month, becomes a vital hoard, especially for youth (time is our friend). We need to understand why compound interest is important and how it can help us generate long-term wealth.

Compound interest encourages us to sacrifice short-term savings now to achieve substantial long-term returns. To understand it, we need to compare compound interest with simple interest. Simple interest is a percentage of a number: for example, on a loan of 10.000$ at 8%, simple interest is 800$ after a year. Compound interest is a formula with which we get interested on interest. A simple analogy to which compound interest is often compared is the snowball thrown down a mountain. In the beginning, it is just a tiny and harmless snowball, but when it gets down to the foot of the mountain, it becomes an avalanche. Using the same example, in the first year our interest is 800$, but next year it becomes 864$.

Look at the table to compare:

Comparing simple interest and compound interest in 30 years 

What will happen if we invest every month? If a 23 years-old person starts investing 100$/month at an 8% annual rate, at 65, he/she will lots of money: we will invest almost 50.000$ but, thanks to compound interest, we will have 394.300$ at the age of 65.

In conclusion, the sooner we take the money off the mattress (bank account) and start investing, the sooner we get to our financial results.

Related articles

Market     24 November 2023

Get your finances in shape

The solution to finding a balance between expenses, savings, and investments is to adopt healthy financial habits that lay the groundwork for future financial well-being. According to T. Rowe Price,...

The North Carolina Association of Free and Charitable Clinics (NCAFCC) has received $500,000 in funding from the Blue Cross and Blue Shield of North Carolina Foundation (Blue Cross NC Foundation) to...

Overjet, the pioneer and leader in dental AI, announced FDA 501(k) clearance for its Periapical Radiolucency (PARL) Assist device. 

In a continuing effort to make high-quality, personalized healthcare more accessible to individuals living and working across the state, CCA Health Rhode Island has added WellOne Primary Medical and...

The size of the invisible orthodontics market in China is expected to grow by USD 314.9 million from 2023 to 2028. Moreover, the market is anticipated to progress at a Compound Annual Growth Rate...

Read more

USA     30 November 2023 - 02 December 2023

2023 Dental Implant Conference

Nov. 30-Dec. 2, Chicago

The 2023 Dental Implant Conference offers an intensive educational program of innovative techniques and procedures for the entire implant team, presented by an internationally renowned faculty of...

Oral cancer (OC) is one of the most common forms of head and neck cancer and continues to have the lowest survival rates worldwide, despite advances in research and therapy. The prognosis of OC has...

Due to high demand, applications have opened early for Glidewell’s 2024 Guiding Leaders program. Returning for its fourth year, Guiding Leaders is an in-person business and leadership development...

If there’s one word that encapsulates Lauren Chapman’s adult life, it’s leader. From captain of the cheerleading team as a Penn State undergrad, to serving as a Surface Warfare Officer in the...

Clinux CAD, the world’s first cloud-based CAD software designed for dentists, is proud to announce three innovations, expanding its range of possibilities for customers.



Most popular