MEPX
Chapter 4 of 10All chapters
  1. 1Knowing your cashflow
  2. 2The emergency fund
  3. 3Debt
  4. 4Saving and compounding
  5. 5Housing and large costs
  6. 6Insurance
  7. 7Tax and payslips
  8. 8Long-term saving
  9. 9Fraud and pressure
  10. 10Making it stick

Chapter 4 of 10

Saving and compounding

Time doing the work.

Compounding

Interest earning interest makes growth accelerate. The effect is unremarkable over a year and dominant over decades, which is why starting early beats saving more later.

  • The rule of 72: divide 72 by the rate to get the doubling time.
  • Inflation compounds in the other direction and must be subtracted.

Goals with dates

Money needed within a few years belongs somewhere safe and accessible. Money not needed for decades can tolerate volatility, which is the whole reason the distinction exists.