In case you haven’t heard, compound interest is the best. You may remember it as an equation you had to memorize for math class, but it’s so much more than that. It’s the concept that powers all sorts of savings and investment products and, over time, allows you to turn your money into, well, more money!
Even though compound interest is easy to understand — compound interest = more money for you! — those who can potentially benefit most from it (those in their teens and 20s) don’t seem to be taking advantage of it. Savings contributions and retirement savings participation rates are falling among young adults. So if we understand that compound interest translates into free money down the road, what could possibly be standing in the way?
As it turns out, it’s not so much a math or finance issue as it is a life issue—if we have trouble identifying our life goals, we’ll also have trouble planning and saving for them. At the risk of sounding like Dr. Phil, we need to understand ourselves before we can fully understand our finances.