The Power of Compound Interest

compound interestGrow Your Savings the Smart Way:

At Public Service we think the first step to empower you and your finances is learning how your money can work for you. One of the most powerful tools in wealth-building is compound interest—a concept that can help you grow your savings over time, whether through a high-yield savings account, an IRA, or other investment options.

What Is Compound Interest?

Compound interest is often called the “eighth wonder of the world” (a quote frequently attributed to Albert Einstein). But what makes it so special? Unlike simple interest, which is calculated only on your initial deposit, compound interest grows based on both your initial investment and the interest that accumulates over time. This means your money isn’t just earning interest—it’s earning interest on the interest!

Let’s break it down:

  • With simple interest, if you invest $1,000 at an annual interest rate of 5%, after 10 years, you’d earn $500 in interest, for a total of $1,500.
  • With compound interest, your interest is added to your balance at regular intervals (monthly, quarterly, or annually), allowing your investment to grow exponentially. If compounded annually, your $1,000 at 5% would grow to $1,628 in 10 years—without you having to add another dime!

The longer you let your money grow, the more powerful compound interest becomes.

Why Does This Matter for Your Savings?

Understanding compound interest can help you make smart choices when saving for big life goals—whether that’s retirement, buying a home, or building an emergency fund. At Public Service Credit Union, we offer products designed to help you maximize the benefits of compound growth:

  • My Smart Checking – Earn a great rate on your balance up to $10,000 when you meet 3 easy requirements. Perfect for short- and medium-term goals.
  • Payroll Certificates– Start saving seriously with our Payroll Certificate. With just a $20 initial deposit, you’ll earn a competitive rate and automatic transfers with each paycheck will help your savings grow quickly!
  • Share Certificates – Lock in a great rate and let your savings compound over the term of the certificate.
  • Individual Retirement Accounts (IRAs) – Your retirement savings can benefit tremendously from tax advantages and compounding over decades.

Getting Started: Small Steps, Big Rewards

The best part? You don’t need a large sum of money to get started—time is more important than the amount. Even small, consistent contributions can lead to significant growth over the years.

  • Open a savings account with as little as $5, and set up automatic contributions.
  • If you’re saving for retirement, consider contributing to an IRA as soon as possible.
  • Take advantage of any employer-matching contributions if available—they amplify the power of compounding even further!

Let’s Build Your Future Together

At Public Service Credit Union, we’re here to support your financial journey with personalized guidance and savings products that help you make the most of compound interest. Have questions? Call or Text us at 260-432-3433, email pscu@mypscu.com, video or online chat connect.mypscu.com.

The sooner you start, the more time your money has to grow. Your future self will thank you!