Compounding: the closest thing to magic in money
Your gains earn their own gains. Time is the multiplier.
Last reviewed: · Reviewed by the Money Scale editorial team
Compound growth means your money earns a return, and then THAT return earns its own return next year. Linear growth adds; compound growth multiplies.
$215,000
$100/mo for 30 years at 10%
Same $100/month for only 10 years would reach ~$20,000. The last 20 years do most of the work.
A 25-year-old saving $200/month until 35 (10 years) ends up with more at 65 than a 35-year-old saving $200/month for 30 STRAIGHT years (same average return).
Takeaway
Start now, even small. Time is the multiplier. Use the Investment Projection calculator to play with scenarios.
Two friends invest the same monthly amount at the same return. One starts at 25 and stops at 35. The other starts at 35 and goes until 65. Who has more at 65?