Earning while you sleep: the power of compound interest

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What is compound interest?

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You’ve probably heard of simple interest—that’s just earning a bit extra on the original amount you put in. Like if you lend a friend money and they pay you back a little more as a thank you.

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But compound interest? It’s a whole other level. Instead of just making money on that initial amount you put into savings, compound interest lets you earn on the interest you've already gained.

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That's compound interest in a nutshell: You earn interest on both your original amount AND the interest that keeps adding up. Before you know it, that money is snowballing quicker than an influencer apology video.

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The downside is that it takes time to build up. Like, ‘this is my retirement fund’ long (as if any of us will ever retire 💀). But compound interest is seriously the closest thing we've got to a money tree. Make it your new financial houseplant 🌱

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Why you, yes YOU, should care

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You know how banks give out interest on your savings, except that literally didn’t happen for 15 years because interest rates were so low? Well, the game has changed. Banks are finally offering decent interest rates on savings accounts - and now’s the time to ✨ capitalize ✨

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The one advantage we have with being young is just as Hannah Montana said: “Time is on my side.” Let's say you start dropping $100 into an investment every month at 20. Now, if someone else starts doing the same at 30, you'll have ten years ahead of them. Thanks to compound interest, even if they invest more cash, you’ll still end up with a bigger pot in the end.

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Sure, the boomers got everything they could ever want out of life, but at least we can watch our savings grow with compound interest. The earlier you hop onto the compound interest train, the better your financial future looks. It's not just about saving - it's about your money working harder for you.

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No girl, boy or whatever math here—just facts.

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Ways to save

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Now you understand the power of compound interest, you probably want to jump on that sh*t right away. But how  do you get started? Especially when your bank account is always empty literally right after payday? 💸

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Automated savings

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Setting and forgetting your savings is the best way to hit your financial goals. Instead of remembering to set aside money every month, set up an automatic transfer from your main account to a savings or investment account. 

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Choose an amount you're comfortable with—it could be as little as the price of a weekly coffee. You won’t even notice the teeny deductions over time, but your savings account will soon thank you for it.

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Round-up savings

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One of the simplest ways to save money is by rounding up your everyday transactions with an app. That pumpkin spice latte you just bought for $4.50? Automatically round it up to $5 and stash the extra $0.50 into your savings 🍯 

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It might seem like pocket change at first, but trust, it adds up quicker than you think.

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Need help doing both of these? Cleo’s here to help 🙋 she’s your new financial bestie, ready to dish out tough love or affirmations as needed.

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Ditch impulse spending

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We're all guilty of it—that late-night online shopping spree or that TikTok shop impulse buy. Follow this technique: when you see something you want to buy, add it to a wishlist or cart, and then wait 48 hours.

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If you still really want it after two days, go for it. More often than not, you'll find the impulse fades. That leaves you with more cash to grow your savings 🌱

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Maxing out that compound interest power 💪

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Compound interest is all about playing the long game, but there are strategies you can use to go after the bag 💰 Here’s how to harness its true power.

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Regularly add to savings

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Consistent contributions are the foundation of compound interest. By regularly contributing to your savings, even if it's a small amount, you're giving your money's growth more fuel. Each contribution acts as another launchpad for the snowball effect.

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Reinvest your gains

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Soon, the interest will start piling up on your initial savings deposit. But don’t cash out now reinvest! By pouring your earnings back into the investment, you increase the principal amount, which then compounds a larger sum. 

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It's like giving your money the ultimate self-care routine, with literally no extra effort from you 💆

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Limit withdrawals

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Every time you withdraw, you're disrupting the compounding process. Imagine if the billionaires had done the same? They might not be where they are today. (Which would be great for the rest of us, but you get our point.)

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The key to maximizing compound interest is letting your funds grow undisturbed for as long as possible. The longer you can hold off from dipping into your investments, the larger they'll grow. 

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If you need the cash now, Cleo makes accessing withdrawals easy so you’re never short on cash. But promise us you won’t do it too often, k?

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Help is on the way

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All this chat about compound interest sounds great, but it’s harder to put it into practice when you're living paycheck to paycheck. That’s where Cleo steps in 💅

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She’s here to give you the financial boost you need. Automated savings for your f*ck it fund and rounding up your transactions are some of the ways she can help you save. 

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And if you need a pep talk? Just type “hype me” for some financial love. Want to experience Cleo’s dark side? Just type “roast me” to unleash her 👹

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Harnessing the power of our tech overlords does have its benefits - like making saving simpler and seamlessly integrating it into your daily life. Soon, compound interest will be making your financial future simpler.

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