The Power of Compounding Interest

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WOMAN: Navy Federal Credit Union. Retirement. Harness the power of compounding interest. It's important to start saving for retirement as early as possible.

 

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Because if you start saving even a little now--

 

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--it can make a big difference down the road. The key is compounding interest.

 

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Text, Compounding interest.

 

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That means you earn interest on the money you save and on the interest you already earned.

 

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It adds up fast.

 

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Different accounts earn different amounts. But let's say you wait to start saving for retirement until you're 40. If you open a savings account or CD that earns 3% a year and deposit $3,000 a year for 25 years, the $75,000 you contributed will have grown to more than $112,000 when you reach 65.

 

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That's pretty good.

 

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But what if you start saving at age 25? If you open a savings account or a CD that earns the same 3% a year and deposit the same $3,000 each year, by age 65, you will have contributed $120,000. But because of the power of compounding interest, that $120,000 will be worth more than $232,000. That's almost twice what you put in.

 

Let's recap.

 

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At 3% interest, if you start at age 40, you'll have $112,659 at age 65. But if you start at age 25, you'll have $232,990 at age 65. Why not start saving now and make compounding interest your super power?

 

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Our members are the mission. For more information, visit makingcents.navyfederal.org. This video is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

 

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