Wie der Zinseszins aus kleinen Ersparnissen viel macht

Compound interest is your savings hiring tiny employees, who also hire tiny employees.

Interest is money an account pays you for keeping savings there.

Start with one hundred dollars. That's your original money, called principal.

Say it earns five percent annually, compounded yearly. Real rates vary.

After a year: one hundred five dollars. Your money brought company.

Leave that interest inside, and it earns interest too. The employees are recruiting.

After another year: one hundred ten dollars and twenty-five cents.

That's interest earning interest, not a secret rich-person handshake.

Adding small savings regularly gives your balance more money to work with.

Time lets this repeat. Early growth looks boring; later growth can get chunky.

Fees and taxes can nibble gains. Inflation can shrink what those dollars buy.

Withdraw money, and less stays earning interest. The tiny office gets quieter.

Your savings can grow their own workforce. Apparently, money also loves networking.