COMPOUND INTEREST
COMPOUND INTEREST
financewithshiva
5/12/20252 min read
💸 What Is Compound Interest and Why Should You Care?
🌱 Let Your Money Grow While You Sleep
Think of compound interest as planting a money tree. You water it with your savings, and over time, not only does it grow — it grows faster each year as it starts sprouting new money trees. Compound interest is your financial BFF, turning small investments into serious wealth if you give it time and consistency.
🔍 What Exactly Is Compound Interest?
Compound interest is when the interest you earn on an investment is reinvested, so you start earning "interest on your interest." That’s what makes your money snowball over time.
Let’s say you invest $10,000 at an annual interest rate of 5%, compounded annually.
After 1 year: $10,500
After 10 years: $16,288.95
After 20 years: $26,532.98
That’s more than 2.5x your original investment — just by letting it sit and compound. (Source: Bank of Canada compound interest calculator)
🚀 Why Starting Early Is a Game-Changer
Let’s say you invest $200/month starting at age 25 with a 7% annual return. By the time you’re 65, you’ll have over $525,000. Wait just 10 years to start, and you’d only end up with $245,000. That’s the price of delay — nearly $280,000 gone.
👉 "The most powerful force in the universe is compound interest." — Albert Einstein
🛠️ Simple Steps to Start Compounding Today
Open a High-Interest Savings Account or TFSA
Use products like the EQ Bank Savings Plus Account to earn competitive rates while keeping flexibility.
Start a Monthly Investment Plan
Use platforms like Wealthsimple to invest in index funds, which compound over time.
Automate Contributions
Set and forget: automatic deposits every payday are key.
Let the Money Sit
Avoid frequent withdrawals. The longer it stays, the harder it works.
💡 Quick Stat to Remember
“$10,000 invested at 7% for 30 years becomes $76,122 — but only $32,434 if you wait 10 years to start.” — National Bank of Canada
🔗 Dive Deeper into Financial Literacy
🔚 Bottom Line
Compound interest is like a snowball rolling downhill — small at first, but unstoppable if you let it keep rolling. Start today, even with just $50/month, and your future self will thank you — in dollars.
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