The Power of Compound Interest: A Scenario for Minimum-Wage Workers

When you work for minimum wage it is hard enough to get by on what you're making, let alone think about saving. But here's a scenario that provides an incentive to bank one hour of the money we make each day. Minimum wage in NYS is $6.75, so I've rounded up to $7. If I make a commitment to save $7 each day for the next 20 years, I will have saved and earned in interest the equivalent of SIX YEARS working at today's minimum wage.

Here's how it works:

$7 a day X 365 days/year = $2,555 per year X 20 years = $51,100

That's how much of my own money I've saved by banking one hour a day of my time.

Now, let's look at the interest: Currently, my savings is in an HSBC Direct savings account earning 4.80%. Using a compound interest calculator, this is the result:

That's $35, 601 in interest! I cannot afford to not save $7 a day. Plus, these are conservative figures. I cannot predict what minimum wage will be in ten years, nor do I know how long I, or you, will leave the money in an account. Maybe you're only 25 years old and will save for 40 years. Use the calculator and plug in your numbers.

Here's a rule of thumb, no matter what you earn: Bank a minimum of one hour of your day every day.