Like most things in life, instead of squirreling away all your extra cash and eating Salticrax at month-end, investing is all about balance and should allow you to enjoy yourself now while providing for your future. So, if you come into some extra cash such as a year-end bonus or an inheritance, consider spending a portion of it but save the rest.

It?s all about time and patience

Investing doesn?t yield results overnight. And with some patience and restraint ? resist taking money out of your investment ? you?ll enjoy the full benefit of compounding interest.

The rule of 72

If you?d like to work out the approximate effects of compound interest on your investment, use the handy 'Rule 72'. It states that you can find out approximately how many years it will take for your investment to double by dividing 72 with the percentage rate of growth.

For example:

• If your investment is growing at a rate of eight percent per year, then it will take nine years for it double (72/8 = 9), or;

• If your investment is growing at a rate of 12 percent per year, then it will take six years for it to double (72/12 = 6).

Debt and compound interest

Debt involves borrowing money from an authorised financial institution and paying a fee in the form of interest. For example, if you borrow R10 000 for a personal loan and fail to repay it within the stipulated time, you will then owe R10 000 plus interest.

Compound interest comes into play when you fail to repay your loan in full. For example, if by the third month you have not paid off the full amount (R10 000 plus interest) you will be charged interest on the initial amount borrowed plus interest on the interest owed ? (R10 000 plus interest + interest). This is why it is important to pay the amount owed on any loan every month.

If you default on a payment, it can cause problems and could lead to a bad credit rating (click here to learn how you can improve your credit rating) if you aren?t able to make a payment plan.