3. 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 their 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 following two scenarios. (Note: In your calculations, use either the formula or the financial calculator. Round your answers to the nearest cent.) Shen, age 25, is starting his savings plan this year by putting away $1,450.00 at the end of every year until he reaches age 65. He will deposit this money at his local savings and loan at an interest rate of 6%. The future value annuity interest factor is 154.7620. You can also use the excel future value (FV) function to solve this problem. =FV(rate,nper,pmt,[pv],[type]) rate: The interest rate per