How compounding grows savings

The concept of compound interest is simple: when you invest, your money earns interest.

That interest is added to your principal, and the next round of interest is calculated on this growing amount. Over time, this creates a ripple effect, where your wealth grows exponentially.

Let us break this down with numbers. Suppose you saved Shs200,000 every month at an annual interest rate of 14 percent, compounded annually.

After 20 years, your savings would grow to over Shs235m, a dramatic increase from the Shs48m you contributed. This is the magic of compounding.

Now, imagine delaying to start saving by 10 years. To reach the same amount in 10 years, you would need to save Shs941,500 monthly - almost five times the amount if you had started sooner.

This illustrates a simple truth; the earlier you start, the more powerful compounding becomes. Time is your greatest financial ally.

The journey to personal wealth and the growth of a country share a common truth; time is the architect of lasting progress.

Just as a country builds hospitals or schools incrementally, without tearing down existing ones to start afresh, wealth creation demands patience, consistency, and a vision that spans decades.

In an era where “get-rich-quick” schemes dominate social media and investment conversations, the true path to wealth remains unchanged; patience and consistency.

Sustainable wealth - whether in the form of land appreciation, business growth, or education - is built over time. This demands years, even decades, not months or days.

Uganda’s economy has grown at an average of five to seven percent annually for decades.

Those who invested consistently in productive assets have seen significant gains but many still underestimate the power of time and disciplined investing.

Wealth is not a sprint; it is a marathon. Those who start early, stay committed and think long-term are the ones who thrive.

The compounding effect does not just apply to money. In your career or business, small, consistent efforts compound too. A skill honed today can unlock a promotion tomorrow.

A mentorship nurtured this year might yield opportunities a decade later. Even relationships grow like interest, each act of trust or collaboration strengthens your network’s value over time. 

Every day delayed is a missed opportunity. Begin with what you have. Adjust as your resources grow. Remember, compounding is not about luck; it is about making a choice to start now and stay the course.

The writer, Joshua Mazune, is the managing director of Maru Credit.