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July 8, 2021
Understanding Compound Interest: Making Time Work for You
You’ve most likely heard us say it before, and we can promise we’ll remind you again: start saving for retirement as early as possible. Even if your retirement is still half a century away, saving should be on your financial radar. Why? Because when it comes to maximizing your dollar, time is money. Understanding compound interest is an important part of financial planning.
Compound interest is your friend.
You probably know that it takes time to reach a savings goal, but you may not have considered the mathematical magic behind the savings equation: compound interest (also known as compounding interest). Basically, this means that your money earns interest, then your interest earns more interest, and then, you guessed it, that compounding keeps repeating over and over. The more time you allow for compounding to happen, the more money you may end up with.
The results are in: time wins.
Take a look at what we mean. The graph below shows two simple savings scenarios and will help you visualize the impact of time on your savings outcome.1 Same initial contribution, same monthly contribution, same assumed interest rate. The only difference? Time.
Figures quoted are for illustrative purposes only and are not necessarily indicative of past or future results of any specific investment. They may or may not include consideration of the time value of money, inflation, fluctuation in principal, or, in many instances, taxes.
Scenario 1: Saving for 20 years
Let’s say you start with just $1,000 and save $50 per week ($200 monthly) for 20 years. You could end up with about $114,500. While this is leaps and bounds better than the alternative of not saving, this amount probably wouldn’t stretch through a long retirement and may leave you with an expenses gap.
Scenario 2: Saving for 40 years
In this example, you start with the same initial amount of $1,000 and save the same $50 per week, but this time, you begin saving earlier, with 40 years to spare until your goal retirement age. Now, you may end up with about $643,500. The extra 20 years of compounding more than quintuples your total and provides a much more comfortable figure to support you during retirement.
To calculate savings outcomes based on different interest rates and contributions over time, you can use the U.S. Securities and Exchange Commission’s Compound Interest Calculator.
Our advice? Start early, save often.
Why should you start saving early? Imagine what compounding interest could do for you. Even small monthly contributions will add up over time and give compounding interest a chance to get to work. Disciplined, consistent saving habits will help you reach your dreams.
Questions? Contact a CFS Financial Advisor.
Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS Financial Advisor will help you build a plan that meets your needs.2 The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.
1The graph shows an estimate of how much your initial savings plus monthly contributions can grow over time, assuming an 8% interest rate and annual compounding. Remember that adjustments in any of those variables will change the outcome.
2Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.
How to Find Your Routing & Account Numbers
When you make a payment online, by phone or on a mobile device, you may be asked for our routing number and your checking account number. Credit unions and banks use these numbers to identify accounts and make sure money gets where it’s supposed to be. You’ll also need to provide your routing and checking account numbers for:
- Direct deposits
- Electronic checks
- Military allotments
- Wire transfers
Where to Find Your Routing & Checking Account Numbers
Your personal checks include both our routing number and your account number, as shown on the Grow check example below.
Don’t have a Grow check? No worries.
Visit any Grow store and ask for a Direct Deposit Form. It lists both your routing number and checking account number.
Making a Loan Payment
When it comes to making payments, we try to make it as painless as possible to pay your loan every month. We have several different ways to pay, including convenient online options.
You have two ways to pay online by transferring funds from another bank or credit union.
- Grow Online Banking (Preferred payment method for any loan)
This is the simplest way to pay your loan. You can make one-time payments or set up automatic recurring payments in Grow Online Banking. Once you log in, select “Transfer/Payments” from the menu. If you’re not enrolled in Grow Online Banking yet, you can set up your account in just a few minutes.
- Debit Card or ACH (Available for auto, personal and home equity loans and HELOCs)
Note: ACH and debit card payments are not available for credit cards or most mortgages, except HELOCs.
We accept ACH payments with no additional fees or Mastercard® and Visa® debit cards with a convenience fee of $4.95. To get started with an online ACH or debit card payment, select Pay Now below.
Pay by Mail
You can also pay any Grow loan by check through the mail. Please remember to include your account number and Grow loan number on the check. (For credit card payments, please do not write your 16-digit credit card number on the check, which can cause a delay in processing the payment.)
Address for auto, credit card and personal loan payments:
Grow Financial Federal Credit Union
P.O. Box 75466
Chicago, IL 60675-5466
Address for mortgage and home equity payments:
Grow Financial Federal Credit Union
P.O. Box 11733
Newark, NJ 07101-4733