Have your sights set on a future goal, but you haven't yet saved any money yet? Compounding will help you reach your goal. Suppose you want to have $15,000 for a down payment on a house in five years. Simply dividing the $15,000 by 5 years, you might think that you have to save $3,000 a year or $250 a month. Because of compound interest, however, you need to deposit only $232 each month in a savings account earning 3 percent interest.

The numbers look even better when you consider longer time frames and higher rates of return. If you want to have $500,000 for retirement in 30 years, you need to invest only $178 a month (or $2,139 a year) through an equity (stock) fund in your Thrift Savings Plan to reach your goal (annualized average of 11 percent)! In other words, a total of $64,080 ($178 x 360 months) of saving will likely grow to half a million dollars in 30 years.