Aileen and I recently opened an RESP for our grandson and made an initial little deposit. An RESP (Registered Education Savings Plan) is a kind of savings account that allows money to accumulate without taxes, provided it is someday used for education. Finn isn’t yet even a year old, so this may seem a little premature, yet there is actually no better time than now because of the principle of compound interest. In this way, a dollar set aside when he is an infant will have a much greater effect than a dollar set aside when he is a teenager.
Though compounding is a simple principle of basic economics, I have noticed that many people don’t know about it. Simply, compound interest means that interest accumulates not only on the principal (the original amount deposited into an account), but also on the interest it earns over time. In the first year, you earn interest on the $1,000 you initially deposited, but in the second year, you earn interest on the $1,000 plus whatever interest accumulated through that first year. In the third year, you earn interest on the $1,000 plus whatever interest you accumulated through
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