False economy What’s in it for me? Understand what makes the

Making investments that get paid back with 
interest can be highly lucrative.
When you borrow money – for example, by 
taking a student loan – chances are you have to 
pay interest on it.
Conversely, when you loan someone money, 
you can expect them to pay interest for it, and 
this is one of the key ways in which those with 
money can attain more wealth.
To understand why paying interest is a fact of 
life, you must first grasp that money is a 
resource just like employees or raw materials.
Imagine you want to start factory. What do you 
need?
Naturally, you need raw materials to create your 
products and the manpower to make them. 
Naturally, you will have to pay for these 
resources.
But you also need capital: money with which to 
build the factory.
In this sense, capital is a resource just like any 
other, and as such must be paid for. To attract 
employees you need to offer a salary, and in the 
same way, to attract capital you need to offer the 
investors something: interest.
As an investor, interest is an attractive way of 
building wealth because of its compound nature: 
you can get your interest earnings to increase 
over time, because you will also be earning 
interest on top of interest.
For example, imagine you invest $100,000 in a 
new business and on the due date the owner 
duly pays you back the original sum plus ten 
percent interest, amounting to $110,000.
You then decide to reinvest the whole amount 
into another business with the same terms. This 
time when you get back the sum plus ten 
percent interest, you’ll receive $121,000 – your 
interest earnings have increased.
You can continue this process indefinitely, 
always earning more and more interest.
As you can see, your money not only works 
tirelessly for you, it also becomes increasingly 
effective at what it does over time.
Next you’ll discover how good luck and hard 
work are related.