The magic of compounding can work to your advantage when it comes to your investments and can be a potent factor in wealth creation. While simple and compound interest are basic financial concepts, becoming thoroughly familiar with them will help you make better decisions when taking out a loan or making an investment, which may save you thousands of dollars over the long term. When investing, compounding is critical. You'll start earning interest on your initial deposit and you'll earn interest on the interest you just earned.
If you are considering a settlement offer or if you want to pay off a settlement, you want to find out how much it is worth today. To do this, you need to calculate the present value, because the lump sum of your settlement’s value is going to be worth less in the future than it is today. When you have a claim to see how much money you would accept or pay today, a simple present value calculation is the answer.
Occasionally a customer asks whether making half monthly payments instead of monthly payments will pay off their mortgage quicker. The answer is no. Let’s assume a 30-year loan. You will only save part of one month’s interest over the 30 years so it is probably not worth it and this is assuming that your bank will process your partial half month payments timely.