Infographic: Compound interest pays off

Savings » Infographic Compound Interest Pays Off

How to save money without trying
By Jean Chatzky
Show Show TranscriptHide Hide Transcript

A friend recently told me about a money game he and his wife play. They save all their $5 bills.  Not ones. Not tens. Just fives. At the end of the year, they're always surprised at how quickly those little bits of money have added up. Better still, it feels like free money. That's Money Rule No. 13: There's no such thing as chump change. I'm Jean Chatzky, and this is Money Rules.


Want to save $200,000? Who doesn't? The best way to do it is slow and steady. Put $50 a week -- just $7 a day, which is roughly the cost of a deli sandwich -- in a retirement account earning a conservative 6 percent interest and you'll have that money in 30 years. Leave it be for 10 more years -- for a total of 40 -- and it will double, to over $400,000.

This is the power of compound interest: How often and how early you save can be more important than how much you save. If you wanted to build $400,000 in 20 years rather than 40, you'd have to put away over $200 a week -- four times as much, and an amount much harder to squeeze out of your budget. retirement planning


Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Ask Dr. Don

Are my savings bonds safe?

Dear Dr. Don, I have approximately $20,000 in savings bonds. Given the state of the U.S. economy, should I cash them in? How safe are they if the economy tanks, the U.S. goes bankrupt or the country gets a serious credit... Read more

Partner Center

Connect with us