The Magic of Compound Interest

The Magic of Compound Interest

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(Last Updated On: July 13, 2018)

Do you like free money? I  do too. “Do you have something better to do than watching your money grow while you sleep?” Sounds good isn’t it, you can make this work but time is your friend, and I mean a lot of time. If you are still in your 20’s or 30’s, you can use this strategy. If you are older you need to put more money to make this work. There are many investments out there that can give you more for your money, this strategy is for people who are into the traditional way of investing like putting money in a bank savings account, and don’t want the risk associated with other investment instruments.

Let’s look at an easy example with  1,000 pesos initial deposit and put monthly deposits of 100 pesos at the bank deposit rate of 0.25% interest.In this example, I used BPI express teller savings interest rate which is available on their website.

This is for a period of 10 years. No withdrawals and only consistent deposits every month of 100 pesos for a period of 10 years. In a year you earn 4.12 pesos. Next year you’ll have 8.5 pesos gaining interest. If it seems like this example is a dripping faucet that will never fill your cup, we want you to multiply your deposit by 10 (1,000) and commit to adding about 100 pesos a month to the pot. Believe me, many tubs have flooded over using this exact method. It just needs to be multiplied over time. Look at this example I calculated at


Anyone can do this. You do not need to be a financial genius, your money will multiply regardless of how smart you are.

Time is on your side. The longer money compounds, the faster it grows. Money growing at 6 percent per year will double in about 12 years, but it will be worth four times as much in 24 years.

Time is NOT on your side if you use Credit cards and use compound interest against you. That’s why “minimum payments” are likely to keep you in debt forever. Double your payment on credit cards so you can get that monkey off your back. So remember use compound interest work for you and NOT against you. Control yourself from getting bad debt. This is debt that takes money out from your pocket.

You don’t have to be rich to make compound interest work for you. The magic works the same whether you invested 100 or 100 million. The millionaire may have more investment options, but everyone can use compound interest to create and enhance wealth.

Sacrifice a little to get a lot. It’s true that you’ll need to put aside money to keep the pot growing, but I guarantee that you’ll be glad you did.

What’s the bottom line? Compound interest is the magic spell to convert pennies into wealth, and it will make a huge difference in your financial strategy. It will be boring and it will take a long time, but if you don’t want to take the risk associated with other investments, you’re still young, try this strategy because it will give you the discipline and experience needed if you wanted to try out other investing strategies.

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