Making sense of compounding interest—breaking down the maths

PETALING JAYA (Oct 6): What if your money could quietly multiply even while you sleep? No side hustle, no risky investment, just quiet, steady growth—every day—while you go about life.  That’s the power of daily compounding interest, a savings system that helps you turn small amounts into something meaningful over time.

Unlike simple interest, which only rewards you on your original deposit, compound interest lets you earn interest on top of your earned interest, making sure that every sen that you have in your account is productive.

For anyone in your 20s figuring out how to stretch your paycheck while saving for the future, this concept could make a bigger difference than you think.

Everything you should know about earning ‘interest’

Let’s start with the basics. Interest is the monetary reward banks or financial platforms give you for letting them hold your money. But not all interests work the same way.

Simple interest is, well, simple. You put RM10,000 into a savings account earning 3% simple interest per annum (p.a.), and you'll get RM300 after a year—no more, no less. A one-time gain that’s straightforward, but limited.

Daily compound interest, on the other hand, lets you earn interest on your first deposit the very next day. Then, on the third day, you’ll earn interest on both your deposit and yesterday’s interest. Over time, your gain upon gain could snowball into a substantial amount.

It’s like planting a durian tree, whose fruit can give you more seeds for replanting, eventually giving you more trees and fruit.

Turning calculations into real numbers

Does the concept still feel abstract? Let’s put this into real numbers.

Meet Danial. He deposits RM1,000 into Boost Bank’s EdgeProp Jar, which earns 3.3% p.a. daily interest, which means the interest is compounded daily. What happens next?

On Day 1, Danial earns about RM0.09. Doesn’t sound like much, but stay with us! After one week, his balance is RM1,000.63, not because he added more money, but because of compounding interest, calculated and credited daily. By Day 30, it’s around RM1,002.72.

And after a full year? Danial’s balance reaches approximately RM1,033.55. That’s RM33.55 earned for simply leaving the money untouched.

And if Danial decides to add, say, RM100 every month? His future savings multiply dramatically faster. This is why compounding rewards the patient and the consistent.

Start early for optimal gain

Why is it important to start early?

Compounding interest’s best friend is time. The earlier you start, the more cycles of growth your money gets. To help you get a better picture of this, let’s compare two friends: Aida and Ben.

Aida starts saving RM100 monthly at age 21. By 30, she would have put in a principal of RM12,000. Meanwhile, Ben waits until age 31 to deposit RM12,000, and thereafter contributes RM100 monthly like Aida. Both get the same 3.3% p.a. daily interest.

However, since Aida has enjoyed compounding interest for 10 years, by 30, her RM12,000 would have grown to around RM12,692, giving her a head start against Ben.

By the time they turn 40, Aida’s total savings are around RM31,852. Ben? Only about RM30,890. That’s RM962 more for Aida—not because she contributed more, but because her money had more time to grow. Her only “advantage” was starting 10 years earlier. No extra effort, no higher salary, just time on her side.

This is why financial advisors will always tell you: start now, even if the amount feels small. Because RM100 a month today beats RM12,000 lump sum 10 years from now.

Earn compounded interest with Boost Bank

Now that you know the advantages, how can you start earning compounded interest?

Boost Bank’s EdgeProp Jar offers this perk: when you invest your money in the Jar, the balance doesn’t just sit there. Every day, it earns tiny bits of interest, and those bits themselves start earning more. It’s a quiet but powerful cycle that helps your savings grow automatically, eventually earning you enough to even start your homebuying journey.

To start growing your own compounding savings, just follow these steps:

1 If you’re a new user, open the Boost Bank app and create an account in a few simple steps.

2 Navigate to the Special Jars section, select EdgeProp Jar, and add your deposit.

Once that’s done, the compounding engine takes over. Every day, your balance grows just a little, adding up quietly in the background. You can even track the growth progress visually within the app. Let’s be honest - watching your savings tick upwards even by a few cents feels satisfying and encourages you to keep going.

Start now, even if it’s small

Compounding interest might sound like an intimidating finance term, but at its core, it’s simply this: the earlier and more consistently you save, the more your money can grow on its own. It’s like building a quiet little machine that runs for you 24/7 with no sweat required.

Start small if you can’t spare more. Even RM100 a month is enough to get going. What matters is starting now, while time is still on your side.

Boost Bank’s EdgeProp Jar is designed to make this easy, automatic, and visual so you can watch your future wealth build itself.

Why wait? Your 40-year-old self will thank you for the RM100 you saved today.