Compound interest is the secret nobody tells you about. It's how rich people get richer without doing anything.
Simple vs compound interest
You deposit 1000 euros. Every year you get 50 euros interest. Predictable, slow, boring.
With compound interest, that 50 euros also earns interest. Your money earns money, which earns money, which earns money.
In real numbers
1000 euros at 5% simple interest for 20 years = 2000 euros. You earned 1000.
1000 euros at 5% compound interest for 20 years = 2653 euros. You earned 1653.
See the difference? It's almost 50% more money.
The trick: time
If you start investing at 25 vs at 35, over the same 40 years, you end up with way more money if you started earlier. Time is your best friend.
How it actually works
Year 1: 1000 euros earn 50. Total: 1050. Year 2: The 1050 earns 52.50. Total: 1102.50. Year 3: The 1102.50 earns 55.12. Total: 1157.62.
See? Every year you earn a little more because interest is calculated on a bigger amount.
Why it matters
Wait 30 years and that money grows almost magically. You did nothing. You just let time do its job.
Your grandparents were right
"Start saving young" isn't a joke. It's because time is the most valuable thing in investing.