Let's look further at the progress of OLB and earned interest over the coming years. At the end of year 2, OLB is still OLB, but it has spawned another dime. It may not be much, but it is interest earned on interest, and that , as Willie Sutton said of banks, is where the money is. That penny represents what is referred to as compound interest . Now we've come to the heart of the matter.
Compound interest is the magic of savings.
That will remain a single dime every year. OLB will always be one lousy buck. That's not much of a money tree. Let's take stock. After two full years of saving, we have only OLB, two dimes of earned interest and one single penny of compound interest.