Money tips for students:What you need to know about interest rates when investing


Tuesday, Oct. 5, 2021 — Kentucky students who want to invest some of their earnings should learn more about interest rates. Learning the basics about simple interest and compound interest will help them make better investment decisions, the Kentucky Higher Education Assistance Authority (KHEAA) says.

“Kentucky students have a bright future because of the growth we’re seeing in the state’s economy,” said Gov. Andy Beshear. “That brighter future can translate into higher earnings, so it’s important for students to learn how to make the most of their investments. That will provide them a better standard of living during their working years and a more comfortable retirement.”

In a savings or investment account, you might receive a compound interest rate, which means you don’t just earn interest based on a percentage of your initial deposit; you earn interest based on a percentage of your initial deposit plus a percentage of the interest you’ve previously earned.

If you make an initial investment of $10,000 at a 3 percent compound interest rate, compounded annually, you’ll have $18,061 in your account in 20 years, and $32,620 in your account in 40 years — your money will have more than tripled without your touching it. Without compound interest, if you were just earning $300 in interest each year off your initial $10,000 investment (simple interest), your account only would have grown to $16,000 after 20 years and $22,000 after 40 years.

KHEAA is the state agency that administers Kentucky’s student financial aid programs, including the Kentucky Educational Excellence Scholarship (KEES). Its sister agency, the Kentucky Higher Education Student Loan Corporation (KHESLC), offers low-cost Advantage Loans to help students and parents pay for college or refinance student loans. For more information about Advantage Loans, visit advantageeducationloan.com.

Many of KHEAA’s student aid programs are funded by Kentucky Lottery revenue.

For more information about Kentucky scholarships and grants, visit kheaa.com; write KHEAA, P.O. Box 798, Frankfort, KY 40602; or call 800-928-8926.


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