1. Compound interest and its effects Understanding the Impact of Compounding There are many reasons why people don't save: "I don't have any extra money, "I promise to start next year," "I have $100. + . what will that do?" "I'd rather pay extra on my bills and get those taken care of first." Many people who did establish a retirement plan have found that, years into thelr plan, they made three mistakes: - They started too late. - They put away too little. - They invested too conservatively. And these pitfalls are magnified when you consider compound interest. Consider the compound interest effect in the foliowing two scenarios. (Note: In your calculavions, use either the formula or the financtal calculator: Round your answers to the nearest cent.) Paolo, age 40 , is starting his savings plan this year by putting away $1,925,00 at the end of every year until he reaches age 65 . He will deposit this money at his iocal savings and foan at an interest rate of 6%. The future volue annuity interest factor is 54,8645 . Based on the information provided, by the time Paolo turns 65 , he will have Sharon, age 45 , is starting her savings plan this year by putting away $1,925.00 at the end of every year until she reaches age 65 . She will deposit this money at her local savings and loan at an interest rate of 6%. The future value annuity interest factor is 36.7856 . Based on the information provided, by the time Sharon turns 65 , she will have Poolo started his investment program five years earlier and set aside more than Sharon. by the time Paolo turns 65 , he will have accumulated more than sharon