BizBuzz U · Compound Interest
Compound Interest
$18 vs $20 an hour is not “almost the same”. Look at the year — then at 25 years.
First, the hour
Only $2 apart. Now look at the year — 40 hours a week, 52 weeks.
The $2 gap = $4,160 a year.
Then time does its work
More than $300,000
That $4,160 a year, kept and grown at 8% for 25 years, can grow past $300,000. Small differences, given time, become big ones.
Do it yourself
- Take your hourly rate.
- Multiply it by 2,080 (40 hours × 52 weeks).
- Repeat with $2 more — and see the year's difference.
✓ A $2 raise is worth $4,160 a year.
✗ “Almost the same” — it is not.
Practitioner tip: Ask what your rate is worth per year before you dismiss a small raise.
SUMMARY
$2 an hour = $4,160 a year. Kept and grown at 8% for 25 years, that yearly difference can grow past $300,000.
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