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The Secret of Compounding Interest!

5 Apr 2017

When it comes to compounding interest the earlier you start saving - the more you make.

Even saving a small amount of money each week, along with the benefit of compounding interest can really turn your savings into something extraordinary.

Sorted.org.nz says “The best compounding happens when any interest we earn gets reinvested and earns even more interest. It’s interest earning interest, and our money is working for us instead of us working for it!”

How does compounding interest work?

Let’s say you save $10 a week at an interest rate of 2.5% pa (after tax) - the Sorted website shows that after five years you would have saved $2,600, and earned an additional $170 in interest. And by continuing to save for 15 years (and increasing your weekly savings amount to take inflation into account) you would have saved $10,400, and earned an additional $3,050 in interest!

How can you calculate the amount you can achieve by regularly saving?

It’s easy - Sorted has a calculator that does all the maths for you. You can find it at sorted.org.nz/tools/savings-calculator

The great thing is that with the power of compounding interest even saving small amounts of money adds up over time. So don’t wait - start saving today!

Stay safe out there.

Talk soon...
Money Penny