What compound interest does to small amounts
Start saving now, even if the amount is small. Compound interest means you earn growth on past growth, not only on the money you put in.
The same deposit over four time spans
Take 200 a month, growing at 6% a year. The pattern is the same in any currency.
| Years | You put in | Growth | Balance |
|---|---|---|---|
| 10 | 24,000 | 8,776 | 32,776 |
| 20 | 48,000 | 44,408 | 92,408 |
| 30 | 72,000 | 128,903 | 200,903 |
| 40 | 96,000 | 302,298 | 398,298 |
- After 10 years: growth is about a quarter of the balance.
- After 40 years: growth is about three quarters of the balance.
- Each extra decade: the same 24,000 in deposits, and a larger amount of growth than the decade before.
Starting early beats saving more
Compare two savers at the same 6%:
| Saver | Plan | Puts in | Ends with |
|---|---|---|---|
| Starts now | 200 a month for 30 years | 72,000 | 200,903 |
| Waits 10 years | 400 a month for 20 years | 96,000 | 184,816 |
The saver who waits puts in 24,000 more and ends with less. Doubling the deposit does not make up for the ten years.
What the numbers leave out
- Ups and downs. A steady 6% is an average for illustration. Real investments rise and fall from year to year.
- Fees. They reduce the return.
- Inflation. It reduces what the final balance buys.
For a more cautious estimate, use a lower rate.
Next: enter your own figures in the compound interest calculator.