13 Aug 2026

SOURCE: CPF Board

What if you could set up a side hustle that grows your income but requires no manual labour or late nights?

It sounds like a deal that’s too good to be true, but that’s how compound interest works. Think of it as earning extra interest on top of additional interest that you’ve already earned.

But here’s the catch: it needs time to work. The ultimate hack to this “lobang” isn't how much money you put in; it’s how early you start. The sooner you start saving, the more room your money can grow and multiply on its own.

What is compound interest?

When you put money in an interest-earning account, you earn interest on your original deposit. If you leave it in for a while, you may also earn interest on top of those earnings. Over time, this interest accumulates and earns additional interest too. This is known as compound interest.

The longer you leave your money, the more time it has to compound. Starting early reduces the amount you need to save to reach a specific financial goal.

For example, if you begin setting aside $100 per month at the age of 25, and your savings earn an average return of 4% p.a., your money will grow to over $116,000 by the time you retire at age 65.

But if you wait and start a decade later at age 35, you will need to save $170 per month to achieve the same amount at age 65.

That's the power of compound interest. It's a powerful tool that can multiply your wealth over time, but only if you give it enough time to work its magic.

How fast can compound interest grow your money?

Another way to look at compound interest is how fast it works in growing your money. Once your savings build enough momentum, your money starts multiplying faster over time.

For example, if you put $10,000 a year into a savings account that gives you an interest rate of 4% p.a., it will take you approximately 8 years to reach $100,000.

But if you maintain this habit and continue to save $10,000 per year at the same interest rate of 4% p.a., you will be able to save your next $100,000 in approximately 6 years — two years faster than for the first $100,000.

The magic happens when your first $100,000 stays in the account and starts earning its own interest. This additional interest makes it much easier and faster for you to accumulate the next $100,000.

The power of compounding on your CPF

Your CPF savings also benefit from the power of compound interest. By earning steady interest rates of up to 5% p.a. (or 6% if you are aged 55 and above), your CPF savings can multiply over time. This compounding effect builds long-term financial security and supports your housing, healthcare, and retirement needs.

Learn about the interest rates and see how your CPF savings work for you.

Ways to make your CPF interest go further

Now that you have a better understanding of compound interest, use it to grow your CPF savings with minimal effort! Here are some simple ways to do so:

1. Make cash top-ups to your Special Account (SA)

Making cash top-ups to your Special Account (SA) helps boost your interest earned and capitalises on the power of compound interest.

You can also claim tax relief of up to $8,000 per calendar year for cash top-ups made to yourself. An additional $8,000 in tax relief per calendar year is also applicable for cash top-ups made to your spouse, parents, parents-in-law, grandparents, grandparents-in-law, and siblings. This means that you can enjoy tax relief of up to $16,000 yearly when you make cash top-ups — but do note that the tax relief benefit is capped at the current FRS level. Terms and conditions apply.

2. Transfer your Ordinary Account (OA) savings to your Special Account (SA)

Your OA earns an interest rate of 2.5% p.a.. If you have already budgeted for your home and have excess OA savings, consider transferring them to your SA (or RA if you are aged 55 and above) to earn a higher interest rate of 4% p.a.

Do note that CPF transfers are irreversible, so it’s important to assess your housing financial situation before making any transfer.

3. Keep your savings in CPF to earn risk-free interest

Leaving your money in your CPF accounts allows it to earn stable, risk-free interest automatically. This boosts your savings, which can be used for your housing, healthcare, and retirement needs in the future.

Alternatively, if you have a higher risk appetite, you may consider investing your CPF savings to further grow your savings.

Compound interest helps to grow your savings

Compound interest is one of the easiest ways to build your wealth over time and secure your financial future. You don’t have to make big moves — you just need to save diligently, and compound interest will work its magic. With time, your savings will multiply and reward you for your patience.

If you want to give your savings a boost and let your money compound earlier, consider making a small cash top-up or CPF transfer today!

Information in this article is accurate as at the date of publication.