The Power of Compound Interest

Do you know that time is actually more important than money?

Let’s quickly circle back to our case study for a second. How is it possible that Zoe, who only invested for 10 years, has more money than Zayn, who invested for 30 years? The answer is time. Zoe had a 10-year head start, and her investment snowballed over time.

Many people hesitate to start investing until they’re older and perhaps “richer,” but they’re unaware of the power of compound interest. Don’t worry, we’re not talking equations here. This isn’t math class.

So, what’s the deal with compound interest?

When you invest, your account earns compound interest. This means you earn money not just on your initial investment (the principal) but also on the interest you’ve already earned. Since compound interest takes into account interest that builds up over time, it really grows at an accelerated rate.

Bitcoin is the perfect example to explain this. Those who bought Bitcoin early on are in a much better position today because their investment has compounded over time. Imagine trying to invest in Bitcoin now—its value has skyrocketed, making it much more expensive now. The earlier investors, on the other hand, have seen their holdings grow exponentially, benefiting from compounding all that interest over the years.

Let’s break compound interest down: Imagine you invest $100 in Bitcoin (that’s your principal), and over time, Bitcoin’s value increases, earning you $20 in interest. Now you’ve got $120 worth of Bitcoin. If you reinvest that total, and Bitcoin’s value keeps rising, you could earn another $40 in interest, bringing your total to $160. In essence, compound interest means you’re earning interest on your interest. When you earn interest on an investment, that interest starts earning interest on itself, and it compounds monthly. So the higher the interest, the faster your money grows.

Here’s the bottom line:

Starting small and building over time is way better than waiting to invest. Time is everything, and it doesn’t really matter how much you start with. You don’t need millions of naira in your account to get going. In fact, starting with a larger sum can be riskier. If you make a mistake, you could lose a chunk of that money.

So, if you’re sitting here thinking, “I don’t have enough money. Let me start when I’m older,” don’t do it. Start now—your future self will thank you for it. The sooner you start to invest, the greater the benefits of compound interest.

Remember to always do your research and consider your individual financial situation before making any investment decisions—this is not financial advice.