The idea in one example
Put $1,000 in an account that earns 5% a year, compounded annually, and leave it for 10 years. After year one you have $1,050. The next year you earn 5% on $1,050, not on $1,000. After 10 years the balance is about $1,628.89, compared with $1,500 if only the original $1,000 earned interest.
Time matters most
The longer money stays invested, the more each year’s growth builds on the last. Starting earlier usually matters more than adding a little extra later.
Add monthly contributions
Open the Compound interest calculator, enter a starting balance, a monthly contribution and an assumed rate, and see how the total grows over the years. Try a few different rates, because the real return is never guaranteed.
Plan toward a goal
Use the Savings goal calculator to work out how much to put aside each month to reach a target, and the Monthly budget planner to see whether that amount fits your income.
Put it into practice.
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