MEPX
Chapter 7 of 10All chapters
  1. 1Choosing under scarcity
  2. 2How prices behave
  3. 3Inflation and real terms
  4. 4Shopping decisions
  5. 5Income and tax
  6. 6Borrowing
  7. 7Saving and compounding
  8. 8Housing costs
  9. 9Work and wages
  10. 10Making better decisions

Chapter 7 of 10

Saving and compounding

Time does the work.

Interest in your favour

Compounding means earning returns on past returns. Starting a decade earlier usually beats saving a larger amount later, because time multiplies rather than adds.

  • Keep an emergency fund in something you can access immediately.
  • Money you may need within a few years does not belong in volatile assets.

Fees and inflation

A one percent annual fee removes a large share of long run growth, and savings earning less than inflation lose purchasing power while the balance rises.