# ‘Free money’ hack | Compound interest – Your magic money box

Free money hack? Ah, yes, please! And believe it or not, you can put this hack to work right away. Ready? Okay. Here it is … drum roll, please …

The easiest way to get free money is compound interest.

WTF? Please stay with me here, I promise youre going to love this.

Compounding is what happens when you take a number and increase it over and over (and over and over and over… you get my drift) again by a percentage instead of by a fixed number. So, instead of adding ten each year, its about adding 10% each year. What? Okay. We know that for many people, percentages dont mean a lot. So, heres a simple example to show you how this is different, and why you should care.

### The magic money box – turning \$100 to \$150 and then \$161

Lets pretend youre a kid. Imagine you have awesome parents who give you \$100 for doing a few jobs around the house, finishing your homework and basically not making their life a living hell. They explain to you that if you leave the money with them (instead of buying sticky things that never come out of your Mums carpet, or toys, or lip gloss, or whatevers making your heart sing at that second) that theyll add 10% to your money box every month.

Okay. Now, this math is pretty easy – I know youve got this one! 10% of \$100 = \$10 more

Now, its probably going to be hard to give up \$100 of instant gratification. Lets face it; you dont even need to be a kid to find that hard! But if they showed you this little chart, I think youd at least give it some thought.

Then your epic parents explain there’s some extra magic at the bottom of the money box. Because the way compounding really works is that you dont just get an additional 10% of your original \$100 every month. Instead, you get an additional 10% of your total dollars every month.

Month 0 (when you start) you have \$100
Month 1: 100 + (100 x 10%) = \$110
Month 2: 110 + (110 x 10%) = \$121
Month 3: 121 + (121 x 10%) = \$133
Month 4: 133 + (133 x 10%) = \$146
Month 5: 146 + (146 x 10%) = \$161

Total extradollars after 5 months = \$61!

How cool is that?

So, this very unsexy, altogether uninteresting concept of compound interest is surprisingly exciting after all! As our favourite Fierce Girl of Finance, Belinda White says, Whats not to love about free money?

### How ‘free money‘ works for you (and against you)

For you

Small changes you make today can have a significant impact on your future. Now, we dont approve of the media obsession with criticising our love of lattes and avo on our toast. Seriously! Cant a girl eat her brekkie in peace? But they do have a teensy-weensy good point. The more we have in our savings account, super fund or in investments, the more it can grow through the benefits of compounding interest. It’s the grown-up version of the magic money box.

Against you

Just remember, the same is true for debt. The longer you leave paying off credit cards, or indulging in Afterpay but neglecting to pay on time, the more its going to cost you in the long run. Now, we know sometimes there are things you just have to have. And youre an adult. You can decide for yourself! But if you can hold out and leave those dollar bills alone to grow, youre going to feel like a kid again every time you pick up your money box and give it a shake. Because it will be heavier, and the jingle jangle of coins will promise bigger returns than the thrill of buying a bag of sweets. Or shoes, or champers, or … you get the drift!

### Simple ‘free money’ hacks you can do today

Paying off debt
Spending less
Saving more
Investing

And of course, sorting your super today is going to make sure you have more dollars invested and growing for your future. For those of you who can live on a little bit less today, topping up your super, even by a little bit each year, is going to make retirement so much sweeter.