How To Use Compound Interest
The Money Class You Never Got in School
What Is Compound Interest?
Compound interest is when your money earns interest—and then that interest earns more interest. It builds on itself every year, making your savings grow faster the longer you leave it untouched.
Why Starting Young Beats Contributing More Later
Here’s a real example. Two people invest:
- Person A: $100/month starting at age 25
- Person B: $500/month starting at age 40
Even though Person B invests more every month, they never catch up—because Person A gave their money time to grow.
How Return Rates Change Your Outcome
This chart shows how much $100/month can grow over 40 years with different return rates. Even a 1–2% difference in returns makes a major impact.
How to Make Compound Interest Work for You
- Start early: Even small amounts add up with time.
- Stay consistent: Make saving or investing automatic.
- Reinvest earnings: Don’t cash out early—let it snowball.
- Choose low-fee investments: Fees eat into compound growth.
Compound Interest Can Work Against You Too
Compound interest also shows up in debt—especially credit cards. If you carry a balance, you're paying compound interest to someone else. Avoid it whenever possible.
Want to See Your Own Growth?
Use a tool like YNAB (You Need a Budget) to track your savings, automate your contributions, and stay consistent with your goals.
Try YNAB free with my link here
You’re in MoneyMode now—and now your future compound interest is, too.
