Unlocking the secrets of monthly compounding

When it comes to building wealth, the loudest voices often talk about working harder, hustling more, or chasing the next big investment. But what if the real secret to financial success wasn’t working harder—but working smarter? One of the most powerful and underused tools in personal finance is monthly compounding. It’s a quiet force that can turn modest savings into substantial wealth over time. And the best part? It doesn’t require more effort—just consistency and a bit of patience.

What Is Monthly Compounding?

Compound interest is often called the “eighth wonder of the world,” famously (and perhaps apocryphally) praised by Albert Einstein. While simple interest earns returns only on the original principal, compound interest earns returns on both the initial principal and the accumulated interest from previous periods.

When compounding happens monthly, your savings are earning interest every month—and then that interest starts earning interest, too. The effect may seem small at first, but over time, the growth becomes exponential.

Let’s break it down by considering Tk 1,000 monthly savings at different rate and time duration:

You save Tk 1,000 per month means yearly Tk 12,000. You invest it in an account earning 10 per cent annual interest, compounded monthly. After 10 years, you’ve contributed Tk 120,000 but your account balance would be approximately Tk 2,06,550. In 20 years, that balance grows to around Tk 7,65,700 whereas you have contributed Tk 2,40,000. In 40 years, you’d be sitting on over Tk 63,76,780 from just Tk 4,80,000 in contributions.

Here it is mentionable that Banks and FI normally offer DPS schemes for up to 20 year tenor.

That’s the magic of compounding: your money works harder than you do.

Why Monthly Contributions Matter?

A key aspect of unlocking compound interest is consistency. By saving on a monthly basis, you’re creating a steady flow of contributions that accelerates your financial growth. Monthly savings help in two important ways:

More Frequent Compounding. The more frequently interest is compounded, the faster your money grows. Monthly compounding means twelve compounding periods a year, as opposed to annual compounding, which only compounds once.

Discipline and Automation. Monthly contributions encourage a habit. Setting up automatic transfers from your checking account to a savings or investment account ensures you “pay yourself first” before spending money elsewhere.

Save Smart: Strategies for Maximising Compounding Power

It’s not just about saving it’s about saving smart. Here’s how to get the most out of monthly compounding:

1. Start Early: The earlier you begin; the more powerful compounding becomes. Even small amounts saved in your 20s can outgrow larger amounts saved later in life. That’s because compounding has more time to work its magic.

For example, someone who saves Tk 1000 month starting at age 25 and stops at 35 could have more by retirement than someone who saves the same amount starting at 35 and continues until 65.

2. Automate Everything: Make saving effortless. Set up automatic monthly transfers into a high-yield DPS account. Treat it like a non-negotiable bill. The less you think about it, the more likely you are to stick with it.

3. Choose the Right Account: To maximise compound growth, your money needs to be in an account that offers compound interest. For instance, High-Yield DPS Accounts which is great for emergency funds or short-term goals.

4. Reinvest Earnings: Don’t pull out your earnings. Whether it’s interest, dividends, or capital gains, reinvesting them ensures that every money continues to grow. Many accounts and platforms allow automatic reinvestment.

5. Increase Contributions Over Time: As your income grows, increase your monthly savings. Even small bumps like adding Tk 100 more per month each year—can massively boost your results over the long term.

The Emotional Side of Compounding

Compound interest isn’t just a financial principle—it’s a mindset. It teaches patience, discipline, and delayed gratification. You may not see dramatic results in the first year or two, but if you trust the process, the results over time are staggering.

It also removes the pressure to take big financial risks. You don’t need to chase volatile stocks or invest in things you don’t understand. With compounding, you can take a slow and steady approach and still win the race.

A Smart Saver’s Takeaway

‘Save Smart, Not Hard’ is more than a catchy phrase—it’s a philosophy. You don’t have to work 40 hours a week or land a six-figure salary to build wealth. By understanding and applying the principles of monthly compounding, you’re using time and consistency as your most powerful tools.

Remember, it’s not about how much you save—it’s about how consistently you save, where you save it, and how long you let it grow.

So start now, even if it’s just Tk 1000 a month. Because with compounding, the best time to start was yesterday. The second-best time is today.

The writer is Head of Retail Distribution Division, Financial Literacy Wing and

Chief Bancassurance Officer, Midland Bank PLC.