This page uses JavaScript. Your browser either does not support JavaScript or you have it turned off. To see this page properly please use a JavaScript enabled browser.
Members First CU of Florida Go to main content

We will be closed on Wednesday, June 19, in observance of Juneteenth. You can access your account anytime, anywhere, using Internet Banking and our mobile banking app.

Become A Member Apply for a Loan Branches ATMs
Home > Tools & Resources > Compound Interest Mind Bend
Compound Interest Mind Bend2/14/2022

"Compound interest is the eighth wonder of the world. He who understands it, earns it... He who doesn't pays it..." 

- Albert Einstein


What is compound interest?

Compound interest means earning interest on your interest. It's a powerful concept in saving and investing.

How to make the most of compound interest: 3 Strategies + Takeaways

Strategy 1: Saving the interest vs. spending the interest

What happens if you withdraw your interest as you earn it?

  • Investor A makes a $1,000 initial deposit with a 5% annual return and doesn't touch his/her account. Total interest earned after 35 years is $4,516.
  • Investor B makes a $1,000 initial deposit with a 5% annual return and spends the interest every year. Total interest earned (and spent!) after 35 years is $1,750.
  • By leaving his/her investment alone, Investor A earned 2.5 times more interest than Investor B.

Strategy 2: Starting earlier vs. starting later

How much difference does a head start make?

  • Investor A starts saving when he/she is 25 and makes a $1,000 initial deposit followed by $1,200 deposited annually with an average 5% annual return.
  • Investor B starts saving when he/she is 35 and makes a $1,000 initial deposit followed by $1,200 deposited annually with an average 5% annual return.
  • At age 60, Investor A will have contributed $42,000 and earned $70,900 in interest on those deposits.
  • At age 60, Investor B will have contributed $30,000 and earned $29,659 in interest on those deposits.
  • Investor A contributed $12,000 more than Investor B but earned $41,241 more in total interest!

The takeaway: Time is money when it comes to compound interest. The longer you wait around, the less interest you'll earn.


Strategy 3: Monthly compounding vs. annual compounding

What difference does the compounding frequency make?

  • Investor A deposits $100 per month into an account that compounds monthly.
  • Investor B deposits $1,200 per year into an account that compounds annually.
  • Both start saving at the same time.
  • Both have an initial deposit of $1,000.
  • Both get a 5% annual return.
  • Both contribute $1,200 a year.
  • After 35 years, Investor A will have earned $76,343 in interest while Investor B will have earned $70,900 in interest.
  • Even though all other variables were the same, Investor A earned $5,443 more than investor B.

The takeaway: Smaller, more frequent contributions are better than larger annual contributions when it comes to monthly compounding.


Investing can be risky: Not all investments are guaranteed — some investments carry the risk of losing money, even when made through a financial advisor or financial institution.


Compound Interest Infographic


It Pays to Start Saving Now

Money Growth

Sometimes it's hard to identify your life goals, but this also means that you may have trouble saving for them too. We understand that it's tough — a lot happens between your teens and your 30s. So, we're sharing a few tips and strategies to help you better understand yourself so you can fully understand your finances and create manageable savings goals.

Learn More


How Useful Did You Find This Information?

Let Us Know

Powered by Delighted.




We'll help make your future brighter with savings and investment tools and resources.





« Return to "Financial Education Center" Go to main navigation
I Want To
I Want To
Loan Center
Loan Center
Credit Cards
Credit Cards
Special Offers
Special Offers
Members First CU of Florida
NMLS #405711
Equal Housing Lender National Credit Union Administration
This Credit Union is federally-insured by the National Credit Union Administration. We do business in accordance with the Fair Housing Law and Equal Opportunity Credit Act.
Members First Credit Union of Florida is not affiliated with Members First Credit Union (Kentucky)

Members First Credit Union of FL is committed to providing a website that is accessible to the widest possible audience in accordance with ADA standards and guidelines. If you are using a screen reader or other auxiliary aid and are having problems using this website, please contact us at 877-434-6328. We are actively working to increase accessibility and usability of our website to everyone. All products and services available on this website are available at all Members First Credit Union of FL branches.


Any external links or websites to alternative sites are not operated by Members First Credit Union of FL. We are not responsible for the content of the alternate site or their accessibility standards.