Add a bit of interest to your life

I love cappuccinos as much as the next person, but think about this; if you are one of those people who works five days a week and buys one cappuccino each day on the way to work at $3.50 a cup, you're spending $17.50 a week.
That's $910 a year, or $4550 over five years.
According to a debt repayment calculator on sorted.org.nz, if you paid the $18 every week that you were spending on cappuccinos on to a mortgage of $120,000 at 8.5 a cent, you would pay off your mortgage two-and-a-half years earlier and save $14,686 in interest. Think about ways to trim some of your expenses and then start a debt-elimination plan to pay off your debt faster.
Many kids are told to save their money, but no one tells them why. Adults don't think about it much either, but the reality is we should all be aware of why we save and how we can get the most out of our savings.
One of the things that affects our savings is the way we receive interest on our money. Interest comes in two ways - simple interest and compound interest.
Simple interest is when you save money and interest is paid only on the original amount put into the account to begin with (called the principal).
Compound interest is the most powerful. When you're saving, the bank (or financial institution) adds interest to your savings at regular intervals ( every month).
If you don't touch the interest, but let it add to your lump sum, then you start to earn interest on your interest, as well as on the original amount you saved.
When it comes to paying interest, look at it as an unfair enemy. It never rests. If you miss too many payments, it will take your house or car and give you a bad credit rating. If it gives you a bad credit rating, then next time you want to use it, you will be charged a higher rate for the privilege.
Receiving interest, on the other hand, can become a wonderful friend if you are the saver. Instead of being in the interest trap, interest is working just as hard for you as it used to work against you. Twenty-four-hours a day, seven days a week, it is earning money for you. When you are receiving interest, instead of paying it, you have made the first step to earning passive income - income that you didn't have to actively work for. Passive income is the quickest way to become financially independent.
Interest is only interesting when you are getting it.
Sylvia Bowden is the author of the book Parents: How to Stop Your Kids From Going Broke!, written to help parents teach their children money and life skills. Her book is available from some Paper Plus stores and her website is www.silbo.co.nz