I’ve spoken about Compounding Interest in the past but I’m revisiting it for my younger readers. Many people, both young and old, make the mistake of waiting to start investing. “I have to save for a car, I can’t put extra money away” or “I like my $9.75 extra mocha latte with caramel every day as a treat”. You understand what I’m getting at…very easy to make excuses. But you don’t have to put thousands of dollars away to start. Any amount will do…. but the sooner you start, the better you will be in the long run. That’s compounding interest! Here is a great site with an easy calculator:
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Or take a look at the chart below. Say you are 20 years old and you decide to cash in some bonds given to you as a child or maybe have just been saving all those $50 bills that Grandmom was putting in your birthday cards each year. (Generous Granny!) You take a thousand dollar investment, put it in a fund or through a financial advisor and say you will auto deduct only $25 dollars a month for the next 40 years. Now I understand that as you get older you can probably invest more but this is hyper conservative for this simple lesson. I used 5% as conservative growth with a 6% variance (range shows if your investment loses 1% during that time…not likely. Gain 5%…very likely. Or gains 11% over that span….quite possible.) Remember also, this is just your separate investment. This would be in addition to any pension or 401K you may have when you start working after college.
Take note when you get to years 30-40. This is why starting early is a MUST! So after you take a look, go start your future of investing today!!
| Years | Variance Above (11.00%) | Future Value (5.00%) | Variance Below (-1.00%) |
|---|---|---|---|
| Year 0 | $1,000.00 | $1,000.00 | $1,000.00 |
| Year 1 | $1,410.00 | $1,350.00 | $1,290.00 |
| Year 2 | $1,865.10 | $1,717.50 | $1,577.10 |
| Year 3 | $2,370.26 | $2,103.38 | $1,861.33 |
| Year 4 | $2,930.99 | $2,508.54 | $2,142.72 |
| Year 5 | $3,553.40 | $2,933.97 | $2,421.29 |
| Year 6 | $4,244.27 | $3,380.67 | $2,697.08 |
| Year 7 | $5,011.14 | $3,849.70 | $2,970.10 |
| Year 8 | $5,862.37 | $4,342.19 | $3,240.40 |
| Year 9 | $6,807.23 | $4,859.30 | $3,508.00 |
| Year 10 | $7,856.02 | $5,402.26 | $3,772.92 |
| Year 11 | $9,020.19 | $5,972.38 | $4,035.19 |
| Year 12 | $10,312.41 | $6,570.99 | $4,294.84 |
| Year 13 | $11,746.77 | $7,199.54 | $4,551.89 |
| Year 14 | $13,338.92 | $7,859.52 | $4,806.37 |
| Year 15 | $15,106.20 | $8,552.50 | $5,058.31 |
| Year 16 | $17,067.88 | $9,280.12 | $5,307.72 |
| Year 17 | $19,245.35 | $10,044.13 | $5,554.65 |
| Year 18 | $21,662.33 | $10,846.33 | $5,799.10 |
| Year 19 | $24,345.19 | $11,688.65 | $6,041.11 |
| Year 20 | $27,323.16 | $12,573.08 | $6,280.70 |
| Year 21 | $30,628.71 | $13,501.74 | $6,517.89 |
| Year 22 | $34,297.87 | $14,476.83 | $6,752.71 |
| Year 23 | $38,370.63 | $15,500.67 | $6,985.19 |
| Year 24 | $42,891.40 | $16,575.70 | $7,215.33 |
| Year 25 | $47,909.46 | $17,704.48 | $7,443.18 |
| Year 26 | $53,479.50 | $18,889.71 | $7,668.75 |
| Year 27 | $59,662.24 | $20,134.19 | $7,892.06 |
| Year 28 | $66,525.09 | $21,440.90 | $8,113.14 |
| Year 29 | $74,142.85 | $22,812.95 | $8,332.01 |
| Year 30 | $82,598.56 | $24,253.60 | $8,548.69 |
| Year 31 | $91,984.40 | $25,766.28 | $8,763.20 |
| Year 32 | $102,402.69 | $27,354.59 | $8,975.57 |
| Year 33 | $113,966.98 | $29,022.32 | $9,185.81 |
| Year 34 | $126,803.35 | $30,773.44 | $9,393.96 |
| Year 35 | $141,051.72 | $32,612.11 | $9,600.02 |
| Year 36 | $156,867.41 | $34,542.71 | $9,804.02 |
| Year 37 | $174,422.82 | $36,569.85 | $10,005.98 |
| Year 38 | $193,909.33 | $38,698.34 | $10,205.92 |
| Year 39 | $215,539.36 | $40,933.26 | $10,403.86 |
| Year 40 | $239,548.69 | $43,279.92 | $10,599.82 |