The Power Of Compound Savings

The power of saving

What Is Compound Savings?

Most people have heard of the power of compound interest — when the interest on your money gets added into your account and then you earn interest on your interest. But let’s be real here. With current interest rates well below 1% APY, the amount of money you need in a savings account to realize any real benefit from compound interest is extremely high.

But what about compound savings? Isn’t that the same thing?? Put your savings into the bank to earn interest on that amount of money??

No, I’m talking about a different kind of compound savings. I’m referring to the amount of money that you accumulate by “trimming” a monthly expense — even by as little as $20.

Coffee Get's A Bad Rap

What do I mean by that?? Every “expert’s” favorite example is coffee. If you don’t buy coffee, you save x dollars per week. That’s all well and good, but it seems to me that coffee gets a bad rap. 

Personally, I believe that if you really enjoy something, then you shouldn’t cut it out. Life is about living, about enjoying life; cutting out things you enjoy so that you can save a few dollars really only makes sense if what you are saving for is so much more important to you (more about this in another post).

So bypassing the coffee… where else can you save $20/month? There are any number of ways to save money on things that you wouldn’t even miss. Take car insurance. When’s the last time that you compared rates? If you have a good driving record, chances are you can save money on your premiums (without changing your coverage at all), just by shopping around, or better yet, by calling your current insurance company and just ASKING for a discount. (Yes, this actually works. John and I have done it a number of times!)

Great. You now have $20 “extra” in your hands for the month. What do you do with it? Buy an “extra” couple of shots in your coffee?? No. Not the right direction of thinking there. ☕

The idea is to “save” this $20/month over the course of a year. While $20 doesn’t seem like much at all, does $240 sound better? That’s what your $20/month ends up being at the end of a year. 

Could you do something special with that $240?? Or add it into that 6-month emergency fund that you keep meaning to start, but never seem to have anything left over to start with? (People don’t really have that kind of savings, do they?? YES! People who have a savings plan really do have that money stocked away.)

This is what I call “compound savings”. Each month that you are able to “save” (not spend, in reality) that amount, it adds into your bottom line and you end up with a nice balance in your bank account!

Now imagine that instead of $20 each month, you were able to “find” an “extra” $200 each month. At the end of the year, you’re looking at a tidy sum of $2400. For only $200/month. Does  $200 seem unreasonable? 

Hand holding bonus card for budgeting

Multiplication Is Your Friend

Grab my FREE MAGIC MONEY tips where I share 7 great tips to easily find an “extra” $500 or more each month — without giving up your coffee OR much of anything else.  It will surprise you — Go ahead, CLICK HERE

Just for fun, let’s keep going with this math… 

Find an “extra” $500/month and you’re looking at $6000 at the end of 1 year. Multiply those savings out over the course of 5 years and you now have a nice little nest egg of… Yes, the math is correct: $30,000!

Take a look at this chart and see if it doesn’t motivate you to find a little “extra” cash each month:

Let me know your favorite tips for finding “extra” cash in your monthly expenses in the comments below.

Happy compound saving!

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