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Money Multiplier & Receipt Reasoning

By brass Staff on May 1st, 2010 • compound interest, Managing your money, simple interest, Investing, Life, Savings
Originally appeared in: Summer 2010
Money Multiplier

Q. How do I calculate the interest earned on my money?

A. There are two standard types of interest: simple and compound. The basic formula for simple interest is FV = P × R × Y, where FV = future value of your money, P = principal amount, R = interest rate, and Y = number of years. If $1,000 is deposited at a 3% interest rate for three years, simple interest is calculated like this: $1,000 × .03 × 3 = $90 earned.

Compound interest factors accumulated interest into the calculation. Both the principal and accumulated interest earn interest. The basic formula is FV = P × (1 + R)Y. $1,000 at a 3% interest rate earns $30 in the first year. The next year the accumulated interest is factored in (3% × $1,030), and so on. By year three, the balance equals $1,092.73.

Visit moneychimp.com, webmath.com and dinkytown.net to find interest calculators.

Receipt Reasoning

Q. How long should I keep receipts for everyday items?

A. Unfortunately, there is no hard and fast rule, but these guidelines should point you in the right direction.

  • Keep purchase receipts as long as the return policy applies.
  • Keep debit and credit card receipts to compare to your monthly account statement.
  • For anything under warranty, keep the receipt until the warranty expires. Include the warranty redemption information in the same place.
  • Keep utility bill statements for about a year in case one of your utility companies makes a mistake. It's also a good idea to keep them to compare costs from year to year.
  • The IRS suggests that you keep tax-related receipts for up to seven years.

When a receipt has outlived its usefulness, destroy it (i.e. shred) so no one can get their hands on your info.

Editor's Note: When answering your questions, the editors consult with experienced professionals from a wide spectrum of industries. We utilize their expertise to give you the answers you need, but it's always wise to seek additional opinions from other professionals.

Sources: irs.gov; bankrate.com; lifehack.org; extension.org; bbb.org; moneychimp.com; investopedia.com; webmath.com; dinkytown.net

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