Make Your Money Work: Compound Interest & Investing Early

If you’ve ever wished your money could grow while you sleep, compound interest is exactly what you’re looking for. And the best part? You don’t need to be rich to start.

What is Compound Interest?

Compound interest is basically “interest on your interest.”

Here’s a simple way to picture it:

• You put $100 in an account.

• After one year at 7% interest, you have $107.

• Next year, you earn 7% on $107, not just $100.

• Over time, your money grows faster and faster—like a snowball rolling down a hill!

The magic formula:

• More time = more growth

• Consistent contributions = bigger snowball

Why Starting Early Matters

The earlier you start, the more time your money has to grow. Even small amounts add up over time.

Example of How Small Contributions Grow Over Time (7% Annual Growth):

• $50/month for 30 years → ~$56,000

• $100/month for 20 years → ~$45,000

• $200/month for 30 years → ~$225,000

Notice how time makes a huge difference—even small amounts become big numbers if you start early.

Where Can You Invest?

1. Index Funds – Baskets of stocks that follow the market (easy and low-cost).

   • Examples: S&P 500 ETFs like Vanguard VOO, Schwab S&P 500 Index Fund, SPDR S&P 500 ETF (SPY)

2. Mutual Funds – A collection of stocks and/or bonds managed by a professional.

   • Example: Fidelity 500 Index Fund

3. ETFs – Like mutual funds but trade like a stock.

   • Example: SPDR S&P 500 ETF (SPY)

4. Roth IRA / Traditional IRA – Tax-advantaged retirement accounts that let your investments grow over time.

   • Resources: Charles Schwab, Fidelity, Vanguard

5. Savings Accounts / High-Yield Accounts – Safer, slower growth, but good for emergencies.

   • Examples: Ally Bank, Marcus by Goldman Sachs

Tips to Get Started

1. Start small: Even $25–50/month grows over time.

2. Be consistent: Set up automatic contributions so you don’t have to think about it.

3. Let it grow: Avoid withdrawing early—your future self will thank you.

4. Learn as you go: Use free resources to track your investments.

Helpful Resources:

• Investopedia: Compound Interest Explained

• NerdWallet: How to Start Investing

• Apps: Charles Schwab, Fidelity, Robinhood, Vanguard

The Bottom Line

Time is your best friend when it comes to money. Start investing early—even a little bit—and let compound interest do its magic. The sooner you start, the bigger your financial snowball becomes.