Compound interest is the addition of interest to the principal sum of your deposit amount, or in other words, interest on interest. In an account that pays compound interest, the return is added to the original principal at the end of every compounding period, typically daily or monthly.

Think of retirement accounts as your golden ticket to freedom. They're like a hidden treasure chest that's just waiting for you to unlock it when you're ready to call it quits. Without this treasure chest, you'll be stuck in the never-ending cycle of work until the end of time. And trust me, relying on Social Security alone won't be enough to fund your luxurious retirement lifestyle!

You can estimate how much money you'll need to retire without spending all day doing math (unless you're a math whiz, then go for it!). Remember the 25x rule and the 4% rule - both offer different takes on saving and spending in retirement.

The 25x rule

Retirement savings can be as easy as 1-2-5x! Let me break it down for you:

• • Estimate your annual spending amount by multiplying the average of your monthly expenses by 12 and adding in less-frequent purchases, such as biannual insurance premiums and annual vehicle registration fees.
• • Multiply your annual spending by 25.

Picture this: you're dropping roughly $42,000 annually (imagine a red carpet entrance) and you magically multiply that by 25 (think of it like a math wizard's trick). Abracadabra! You now have a sparkling $1.05 million (cue the fireworks!). Now take that number and give it an extra shine, based on your retirement preferences (perhaps a mansion with a gold-plated pool?) and other factors (like how many extravagant vacations you want to take per year).

The 4% rule

The 4% rule is all about having some fun with your retirement savings! It suggests that you can withdraw 4% of your moolah each year, giving you about 30 years of playful financial freedom. Picture this: you're retiring and you want to spend $5,000 a month instead of your current $4,500. That's a sassy $60,000 a year! To reach that goal, divide $60,000 by .04 to get $1.5 million (or you can multiply by 25 for the same result). It's like aiming for a sizzling investment target to keep the good times rolling!

You can open a savings account for your child as soon as they have a Social Security number. You have two options: a custodial account or a joint savings account. In either case, you'll need identification and an initial deposit.

With a custodial account, you will manage the account; your child won't be able to conduct any transactions without you. With a joint account, your child may be able to do more on their own, including using a debit card.

You can start teaching your kids about money as early as age 3, as long as you consider what will make sense to them at that age. Before age 5, focus on concepts like delayed gratification and the value of work. Storybooks are especially helpful because they present essential ideas in relatable ways. You can even make learning about money into a game.

As kids grow, so does their capacity to learn about finances. To keep them engaged, make talking about money and saving a part of everyday life:

• • Point out prices while you're grocery shopping.
• • Provide an allowance and help your child manage it.
• • Open a joint savings account and involve your child in the process.

By the time your child is a teen, it's time to introduce how goal setting, part-time jobs and even credit can help them reach their own financial goals.

Money-saving challenges are budgeting activities that encourage spenders to achieve a certain financial goal creatively. Whether saving up or changing a financial habit, money-saving challenges may help you keep track of your spending and set small achievable goals.

Saving challenges can be fun and may also help you …

• Start a habit of consistent saving
• Learn about your financial goals
• Track your budget
• Improve your personal finances