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One person saves $25 a month. Another drops in $300 once and forgets about it. Ten years later one of them has seven times the other — and it isn't the one most people guess.
Two savers, ten years, the same 7% interest. Don't do any maths yet — just watch which line wins, and notice when it starts pulling away.
year 1 of 10
The steady saver wins — but look again at the shape of that line. It doesn't climb like a staircase. It curves upward, getting steeper every single year. That curve is the whole subject of this course.
When your money sits in a savings account, the bank uses it and pays you a small fee for the privilege. That fee is interest. At 7% a year, every $100 you leave alone earns you $7.
So far, boring. Here's the part that isn't.
Next year, the bank pays you interest on your money and on last year's interest. Your interest starts earning its own interest.
That's compounding. It's the difference between money that sits and money that works — and it explains the curve you just watched. Each year the pile is bigger, so each year's 7% is a bigger number than the year before.
Start with $100 and leave it completely alone at 7%. Nothing below is hidden — the middle column is the actual arithmetic the bank does.
In the table above, year 10 paid more interest than year 1. Why?
That was $100 sitting still. Real saving is a bit every month. Drag the slider to whatever you could actually put away, and watch ten years happen.
Grey is money you earned and deposited. Green is money the interest made for you — money nobody paid you for.
yr 2: $600 put in, $42 added, $642 total. yr 4: $1,200 put in, $180 added, $1,380 total. yr 6: $1,800 put in, $429 added, $2,229 total. yr 8: $2,400 put in, $805 added, $3,205 total. yr 10: $3,000 put in, $1,327 added, $4,327 total
Try it at $5 a month, then at $100. The green slice doesn't just get bigger — it gets bigger as a share of the total the longer the money has to work. Which leads to the single most useful fact in this whole course.
Meet two savers. Ana saves $50 a month from age 15 to 25 — ten years — then stops completely and never adds another dollar. Ben starts at 25 and saves the same $50 a month for thirty years, until he's 55.
Ben deposits $18,000. Ana deposits $6,000 — a third as much, and she quit thirty years earlier. At age 55, at 7%:
Ana has roughly $70,000. Ben has roughly $61,000. She put in a third of what he did, and still finished ahead.
Ana's money simply had more years to compound. Her last deposit at 25 sat and grew for thirty more years; Ben's last deposit at 55 grew for none at all.
Starting early beats saving more. That isn't a motivational slogan — it's just the curve you watched at the start.
Ana finished ahead of Ben. What actually gave her the advantage?
Compounding isn't a savings-account thing. It's a maths thing — it happens anywhere a balance grows by a percentage of itself. Sort each one, and read why.
Tap an item, then tap where it belongs
Everything you just learned works identically against you when the balance growing is something you owe. That's why credit card debt is dangerous in a way that borrowing $20 from a friend isn't.
A typical card charges around 22% a year, compounding monthly. Put $1,000 on it, pay nothing, and in three years you owe roughly $1,923 — you nearly doubled a debt without buying a single extra thing.
Same curve. Same maths. Pointed the other way. Compounding is a tool, not a blessing — it works for whoever is on the right side of it.
A 16-year-old wants the most money by age 50. Which is the strongest move?
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Figures: 7% compounded monthly. $25/month for 10 years reaches $4,327 on $3,000 deposited (so $1,327 of it is interest); $300 deposited once reaches $603, roughly one seventh as much. Ana ($50/month, ages 15–25) has about $8,654 at 25; left untouched to 55 that becomes ≈ $70,000. Ben ($50/month, ages 25–55) ≈ $61,000 — she deposited $6,000 to his $18,000. $1,000 at 22% APR compounded monthly for 3 years ≈ $1,923.