Chapter 03 · Beginner · 6 min read
Interest works both ways
The snowball that either feeds you or eats you
Compounding explained with numbers small enough to picture.
Compounding, in one picture
Interest is rent on money. When you save or invest, you collect it. When you borrow, you pay it.
Earning returns on your returns, so growth speeds up over time. means you start earning interest on your interest. €200 a month at a 6% average return is €2,400 in, but after ten years the pot is meaningfully larger than the €24,000 you paid in.
The same maths in reverse
A credit card at 20% is Earning returns on your returns, so growth speeds up over time. pointed at you. The minimum payment is designed to keep the snowball rolling in the lender's direction.
This is why clearing expensive debt usually beats investing: a guaranteed 20% saved is hard to match in a market.
Time beats timing
The biggest lever is not picking the perfect fund. It is starting, staying consistent, and giving it years.
Words worth knowing
Open dictionary- Compound interest
- Interest earned on both your money and the interest it already made.
- APR
- The yearly cost of borrowing, including fees.
- Real return
- Your return after inflation is subtracted.
Why is high-interest debt usually the first priority?
Try it yourself
Open the growth calculator and compare €100 a month for 10 years versus 20 years.
Can you spot it?
Two savers put in the same amount. One started eight years earlier. Who usually ends up ahead?