Albert Einstein was reportedly once asked, “What is the greatest invention man has ever produced?” He replied “Compound interest”. Or so the story goes… but, regardless of whether he said it or not, compound interest is a very powerful way to grow your money and it’s “relatively” simple to take advantage of.

One cent or $1 million today?

Would you prefer to receive $1 million dollars today or one cent that doubled its value every day for the next 30 days? Most people would take the $1 million today. But as an extreme example of how compound interest works – if you took one cent today and doubled it every day for 30 days you would end up with almost $5.4 million. Unfortunately, you won’t double your money every day in the real world but it’s a great example of how money can grow with compound interest.

Day	Value	Day	Value
1	$0.01	27	$671,088
2	$0.02	28	$1,342,177
3	$0.04	29	$2,684,354
4	$0.08	30	$5,368,709

How you can use compound interest to your benefit

We understand that earning money isn’t easy and there are loads of things to spend it on. And let’s face it, saving in super isn’t the most glamourous. But the beauty of compound interest is that it allows you to earn interest on your interest without much involvement from you. You work hard to earn your money – but if you put some of it into your savings, your money will then work tirelessly on your behalf. You don’t have to do anything!

Seem simple enough? There are two rules to get the most out of compound interest:

1. Invest over the long term (super is a great long-term place to put your savings)
2. Keep adding to your savings (the more that goes in the faster it grows)

So back to our original question – could you part with $50 a month? That’s only $1.66 a day. On a monthly basis you’d probably barely notice the difference if you had it taken out of your pre-tax salary. In fact, with the way tax works, your salary would only drop $31 a month after putting $50 a month into your super (because you’d pay less tax).

For example, a 30 year old could turn $50 a month into an extra $25,722* by age 67. $100 a month could turn into an extra $51,445^ over the same period. That’s equal to more holidays or nights out with friends and a big step towards the freedom to continue to enjoy the things you love.

And, the benefit of being young is that you have time on your side. The earlier you start the easier it is (and the less you have to sacrifice).

So, if you can spare $50 a month - you could help secure your lifestyle when you finish working. If you’d like to see how boosting your super could impact your final balance try our retirement income projector – you just need to put in your age, salary and current super balance and it will give you an idea of how much you may have when you reach 67.

See how your super is tracking

Start boosting your super now

The easiest way to grow your super is to get some of your salary directed into your super. Simply speak to your payroll department or, if you work for Telstra, you can do this through People Express.

If you have any questions we can help you work out how much you can put into your super and how much that may grow your savings. TelstraSuper Financial Planning has a team of Advisers that can help you over the phone at no additional cost as this kind of advice is included in your membership.

You can speak to an Adviser by calling 1300 033 166 or request a call back online.

Super conversation

We know not everyone thinks super is well....super. But it's pretty important for your future. We're developing a series of videos around the super conversations people have. Check out our latest on kick starting your super - it's only two minutes. Maybe after you'll want to have your own super conversation. 

Listen in

*based on a 30 year old who earns $95,000 a year and has $80,000 saved in super saving $50 a month from their pre-tax salary.

^based on a 30 year old who earns $95,000 a year and has $80,000 saved in super saving $100 a month from their pre-tax salary.

Examples done using the TelstraSuper retirement income projector. Assume ongoing Superannuation Guarantee rate of 9.5% increasing to 12% by 1 July 2025, investment returns based on MySuper Growth lifecycle options and inflation rate of 2.5% pa. Results are discounted to today's dollars. Contributions are made pre-tax and are indexed to inflation. Assumes administration and insurance fees of $201 p.a. Note that the projector imposes some limits on the fixed assumptions but the actual experience could be outside these ranges (e.g. investment returns may be negative in some years).