The Power of Compounding

by Andy Hough on January 26, 2012

It’s a given that saving money is easier done a bit at a time, rather than large amounts. A ten-spot? Fifty cents a day a month, with a few days to fudge on. A hundred dollars a month, on the same principle, is a little less than $3.50 daily — skip your morning coffee, or choose a cheaper entree at lunch, and you’re part of the way there, nearly painlessly.

Tuck the accumulating money in a higher-interest online account, like Ally Bank. Sure, interest isn’t high right now — a $1200 deposit (i.e., 12 months of $100 monthly) will only earn you a little more than $10.00, at the current rate of .84%. But that’s ten bucks you earned with no effort.

Your best asset in this process is time. Interest rates won’t be low forever; even if they hang on the tip end of nowhere for a while, your growing savings will qualify you for a higher-interest CD, instead. (Check out the best current deal at

Other things in life benefit from compounding. Take food. Instead of a steak tonight (around $7.00/lb as of this writing), choose a steakburger or pork loin ($3/lb or less). Use the extra money saved to buy steak when it’s on sale. (Holidays like Valentine’s Day, Memorial Day and the Fourth, or Labor Day often feature fancy cuts for much less.) Or put it into fruit you crave — apples, pears and oranges are a lot cheaper in a ten-pound bag, than by the piece or pound. (Save that extra to invest in higher-quality coffee, travel mug and a coffeepot with a timer — fresh coffee when you wake every morning, and no stops for bitter coffee in a paper cup.)

Don’t forget to compound your time, too. Shovel your walk soon after the snow stops, so the sun can finish the job. (Smugly read the paper while watching your neighbor scrape ice off his porch — priceless.) Putting away tools after use means they’re ready again when you need them — and you won’t be buying unnecessary extras because you can’t find one. (Not that I’ve ever done this!)

Clean, put away clothes mean less urge to go out and buy new ones. And a little water swirled in pots and pans right after cooking (unless they’re cast iron) means less scrubbing time afterwards. It may not seem like much at the time — but it is, with these helpful tips:

*Save a bit at a time…more as you can afford it.

*Go without — or choose something less, even if just this once.

*Put the saved money into quality items. They taste better, and reduce your cravings for junk. Higher-quality clothes, tools and furnishings wear longer, and look better while they’re doing it.

*Use it, clean it, put it away.

*Every minute counts — even if it goes to something relaxing.

Let the positive power of compounding change your life, a bit at a time.

This post is by staff writer Cindy Brick. Cindy is a quilting expert with several published books on the subject and has also had many published articles on a variety of subjects. You can visit her business website at or visit her personal blog.

{ 10 comments… read them below or add one }

1 Squirrelers January 26, 2012 at 6:14 pm

Compounding time…..I like that concept, as you related it to shoveling snow, but it actually deserves some further thought. Increasing efficiency by having things get done on their own or through other resources can be huge.

2 Money Beagle January 27, 2012 at 9:11 am

I’m so bad about putting tools and such away when I’m done with them. As such, my tool areas get cluttered and messy. It’s always a good feeling when I clean them up but I know that just putting them away when I’m done would save all the time needed to do the cleanup. I’m trying to make a conscious effort to put stuff away the moment I’m done with it.

3 Emily January 27, 2012 at 6:09 pm

Never thought about compounding in those other realms…thanks for the tidbits. πŸ™‚

4 Melissa@Mom's Plans January 30, 2012 at 11:53 am

I hadn’t thought of compounding time either. I often don’t put stuff away and then I find myself either sorting through a pile of clutter or worse yet, moving the clutter to get to something underneath it. Just taking care of the items as I take them out would save me quite a bit of time.

5 retirebyforty January 30, 2012 at 4:18 pm

Every little thing make a difference in the long run. Saving a bit more money and earning a little more will make a big impact over 50 years. Life is a long term game. πŸ™‚

6 Andy Hough January 30, 2012 at 5:46 pm

It is something I need to get better at too.

7 Andy Hough January 30, 2012 at 5:47 pm

I’ve missed out on a lot of the power of compounding but I can still take advantage of it.

8 Andy Hough January 30, 2012 at 5:48 pm

You’re welcome.

9 Andy Hough January 30, 2012 at 5:51 pm

Once you get in the habit of putting your tools away it will become easier to do.

10 Andy Hough January 30, 2012 at 5:53 pm

There are lots of areas where I could increase my efficiency and I’d guess that is true for most people.

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