Your money grows with compound interest

Making smart financial decisions now—such as saving your money so that it earns compound interest—can secure your future. You might find yourself with extra money to spend during different points in your career. Perhaps you worked overtime hours or received hazard duty pay. These extra funds can feel like a windfall and that there are endless possibilities for what you can purchase. While that might seem attractive in the short term, investing your earnings with compound interest can literally “pay off.”

You earn interest—money the bank pays you—from saving or investing a set amount. For example, if you save $100 in a savings account with a 5% annual interest rate, you’d have $105 at the end of the first year: your original $100 plus $5 in interest. Compound interest is what you earn on the money you save and on the interest that money earned. Using the same example, you’d have $110.25 at the end of the second year: $105 plus $5.25 in “compounded” interest.

The more you save, the bigger your interest compounds. And when you come into a large sum of money, perhaps from deployment pay, you have a unique opportunity to make that money grow. Check out how much you could earn by using a compound interest calculator. Visit your bank’s website or meet with a financial counselor to learn about other opportunities to earn compound interest and how to invest in stocks and bonds too.

Keep your eyes on long-term financial goals and stay financially fit by creating and sticking to a budget. Refrain from buying “extra” things in the short term too. And set aside money—up to 6 months of living expenses—in a “rainy day” savings account to help cover emergencies, costly car repairs, and other unexpected expenses.