By Babajide Komolafe

The fourth basic ingredient of wealth creation is what is called Compound Interest. Compound interest is interest earned on your original savings and interest earned.
If you invest N10,000 at 10% interest rate. At the end of the first year, your money becomes N10,000 plus N1,000 interest. But in the second year, your money becomes N10,000 plus N1,000 plus additional N100 which is the interest on the interest of N1,000 earned on your N10,000 in the first year.
Compound interest makes your savings grow exponentially or it multiplies your savings. However, the real effect of compound interest is in the long term. For example, if you invest N1,000 at 10% annual compund interest rate, in five years, your money will grow to N1,645, in 10 years to N2,593.74, and in 20 years, to N6,727.5.
In the first 10 years, the interest for each year as follows: N100, N110, N121, N133, N146.41, N161.05, N177.16, N194.87, and N214.36. Note that by the 10th year, the yearly interest has doubled to N214.36 compared to N100 in the first year. Furthermore, in the 20th year, the annual interest, or increase on your money is N611.59, which is six times the interest in the first year.
Note that this is an investment (N1,000) you made once. Now imagine what the result will be when you make monthly savings and investment of N1,000 monthly at the same 10% annual compound interest rate. The monthly investment would have grown to N74,871.71 in five years, to N193,842.84 in 10 years, and to N694,027.49 in 20 years. Hence, the real power of compound interest is in the long term. The longer the duration, the bigger the growth in the money invested.
This leads to the fifth basic ingredient of wealth creation— TIME. It takes time to build legitimate wealth. All the other four basic ingriedient of wealth creation requires time. It takes time to acquire more knowledge, additional skill and widen your network in order to increase your income. It takes time to grow savings and increase the amount of money invested. And it takes time for your investment to enjoy the power of compund interest to multiply your investment. Wealth creation requires doing the right thing repeatedly over a long period of time. Hence, patience, endurance, persistence and resilience are critical.
Finally, the above shows that wealth creation is not about the kind of job you do or the amount of income you earn. Anyone, be it an illiterate artisan or educated professional can become weathly by applying these five basic ingredients.