If you’re in high school, college, or even starting your career, you might feel like saving money isn’t a top priority right now. You might be focused on school, part-time jobs, or just trying to cover your basic expenses. But the truth is, time is one of the most powerful tools you’ll ever have when it comes to building wealth—and the earlier you start using it, the better off you’ll be.
That’s because of something called compound interest. And once you understand how it works, you’ll realize why starting small, early, and consistently can make a huge difference over time.
The Magic of Compound Interest
Compound interest is what happens when you earn interest not just on the money you save, but also on the interest you’ve already earned. In other words, your money starts earning money—and then that money earns more money.
It’s like planting a tree. At first, growth is slow. But over time, as it gets bigger, it grows faster. The same thing happens with your savings. The earlier you start, the more time your money has to grow—and even small amounts can lead to big results.
Let’s look at an example:
- Imagine you start saving $100 per month at age 18 and earn an average return of 7% per year (a typical long-term return for the stock market).
- If you keep that up until you’re 65, you’ll have about $367,000.
- But if you wait until you’re 28 to start saving that same $100 per month?
- You’ll only have about $174,000 by age 65.
That 10-year head start more than doubled your savings—without you saving any extra money. That’s the power of time and compounding.
Starting Small Is Totally Fine
You might not have $100 a month to set aside right now—and that’s okay. The important thing is to start with what you can do. Even $10 or $20 a month makes a difference when you’re young, because you’re giving your money more time to grow.
It’s not about being perfect. It’s about building the habit of saving and understanding that your future self will thank you for every dollar you save today.
You can set up a basic savings account, or if you have a part-time job and want to go one step further, open a Roth IRA. It’s a retirement account that lets your savings grow tax-free—and it’s especially powerful when you start young.
Saving = Freedom
Saving money isn’t just about retirement. It’s about freedom. When you have money set aside, you have more options. You can say yes to things you care about, avoid debt when unexpected expenses pop up, or take a gap year, start a business, or move to a new city without panicking about money.
Saving gives you space to breathe—and time to make decisions based on your values, not just your bank account.
It’s Not About the Numbers—It’s About the Mindset
The habit of saving is more important than the amount you’re saving at first. If you can learn to put money away consistently, even when you don’t have a lot, you’re building a mindset that will carry you through every stage of life.
You’ll be more prepared for emergencies, more confident in your decisions, and less stressed when things don’t go as planned. And when you do start earning more later in life, you’ll already know what to do with it.
This Week’s Question:
What would you want to save for?
It could be something short-term like a concert, a trip, or a new laptop. Or something big, like starting your own business, buying a house one day, or retiring early. Whatever it is, write it down—and think about how you can start working toward it now.
Challenge for the Week
- Pick a savings goal—big or small. Name it. Make it real.
- Open a savings account if you don’t have one already.
- Set a weekly savings target, even if it’s just $5 or $10.
- Look at what you’d have in 10, 20, or 40 years if you stuck with it. (There are tons of online compound interest calculators that make this easy and fun.)
This is Week 3 of our Financial Literacy Month series. Next week, we’ll wrap up with a look at borrowing and credit—how to use debt wisely and avoid common traps. Until then, keep saving and stay on the RightTrak.